NRF forecasts retail sales to rise from 4% to 6% in 2023

Retail growth is expected to moderate in the months ahead, but it will remain positive even as sales start to stabilize from pandemic-era highs.

Retail sales in the United States are expected to grow at a slower pace this year than last, according to the National Retail Federation’s annual forecast. NRF expects that retail sales will grow between 4% and 6% in 2023, to total between $5.13 trillion and $5.23 trillion. (The NRF forecast excludes motor vehicles, gasoline, and restaurants.)

By comparison, retail sales grew 7% last year, to $4.9 trillion.  NRF pointed out that its 2023 forecast is above the pre-pandemic, average annual retail sales growth rate of 3.6%.

NRF chief economist Jack Kleinhenz noted that aggregate economic activity has held up well, despite restrictive monetary policy that is working purposefully to curb inflation. He acknowledged that recent developments in the financial markets and banking sector as well as some unresolved public policy issues complicate the outlook.

“While it is still too early to know the full effects of the banking industry turmoil, consumer spending is looking quite good for the first quarter of 2023,” Kleinhenz said. “While we expect consumers to maintain spending, a softer and likely uneven pace is projected for the balance of the year.”

Non-store and online sales, which are included in the total figure, are expected to grow between 10% and 12% year-over-year to a range of $1.41 trillion to $1.43 trillion. Physical stores are observed to still be the primary point of purchase for consumers, accounting for approximately 70% of total retail sales.

NRF projects full-year GDP growth of around 1%, reflecting a slower economic pace, which is half of the 2.1% increase from 2022. Inflation is on the way down but will remain between 3% and 3.5% for all goods and services for the year.

Although the labor market has remained resilient, NRF anticipates job growth will decelerate in the coming months in lockstep with slower economic activity and the prospect of restrictive credit conditions. The unemployment rate is likely to exceed 4% before next year, the group said.