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NRF Big Show: Positive outlook for 2020

The economy is positioned for steady growth this year.

That’s according to the National Retail Federation, which reported that despite the economic and political uncertainty that fueled 2019, consumers continued to spend — and plan to continue to doing so. While the economy slowed to an expected 2% pace of growth in the final quarter of the year, the U.S. economy continued to set a record of consecutive months of growth. Based on this growth, Jack Kleinhenz, NRF chief economist, is optimistic that NRF will hit its economic forecasts for the year. Kleinhenz shared his predictions during the “Prospects and Perspectives on the U.S. Economy” press and analyst session at the annual NRF conference on Jan. 13.

During the session, Kleinhenz predicted that real gross domestic product (GDP) growth would slow from 2.9% in 2018 to a 2.5% range in 2019. He also expected that personal consumption growth would decelerate from 3% to 2.5%. (These statistics will be confirmed when the first estimate of fourth-quarter GDP and personal consumption spending becomes available at the end of January.)

Further, NRF predicted last February that retail sales – excluding automobile dealers, gasoline stations and restaurants – would increase between 3.8% and 4.4% in 2019. Retail sales were up an average of 3.5% during the first 11 months of the year.

“I think 2020 will be a little more balanced and less uncertain,” Kleinhenz said at the conference. “I don’t see any sign of a downturn. The consumer continues to be the driver for the economy, and has the ability and willingness to spend.”

To encourage consumers to spend, retailers will focus on how to innovate, drive efficiency and better service their customers. This will require retailers to contemplate how to invest more heavily in automation, and use it to get goods into consumers’ hands faster. 

However, these investments won’t immediately translate into improved earnings, according to Steven Blitz managing director, chief U.S. economist TS Lombard.

“All of the innovations you see here haven’t translated into an explosion of earnings because they are competing against the final price of a product,” he said at the session. “If retail prices should stabilize or start to go up, the earnings of retail firms will skyrocket.”

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