NRF: Signs point to potential record sales growth in 2021 — depending on COVID-19
The pandemic remains the largest uncertainty and the biggest risk the economy faces in 2021, even as an array of economic indicators point toward potentially record retail sales growth for the year.
That’s according to National Retail Federation (NRF) chief economist Jack Kleinhenz who said that while there is doubt the economy is positioned for growth in 2021, how much growth comes down to a single non-economic force — COVID-19.
“I am optimistic about improving macroeconomic conditions as COVID-19 infections decline and distribution of vaccines becomes more widespread,” . said Kleinhenz. “Yet the road is never straight, and we have challenges ahead.”
Kleinhenz’s remarks came in the March issue of NRF’s Monthly Economic Review, which said the economy is entering its second year of strong savings, high stock values, increased home prices, enhanced government support, and record-low interest rates despite the pandemic. Employment and wages are growing, and consumers have “plenty of purchasing power” that will combine with pent-up demand to provide “accelerants for growth.”
Based on those and other factors, NRF forecasted that 2021 retail sales – excluding automobile dealers, gasoline stations and restaurants – will grow between 6.5% and 8.2% over 2020 to between $4.33 trillion and $4.4 trillion. That could top 2020’s growth of 6.7%, which broke the previous record of 6.3% set in 2004 despite the pandemic.
The pandemic has helped the growth of online shopping, which increased 21.9% last year and is expected to grow between 18 percent and 23 percent this year. Online and other non-store sales, which are included in the total retail sales forecast, are expected to reach between $1.14 trillion and $1.19 trillion. Kleinhenz said many consumers who had not tried e-commerce before the pandemic are likely to continue shopping online.
Largely because of COVID-19’s impact on the ability of the public to travel, go out to dinner or attend entertainment and sporting events, 2020 saw a shift toward spending on goods rather than services, which normally make up 70% of consumer spending. Kleinhenz expects retail to continue to benefit from that shift, but said some pre-COVID services spending will return, particularly among affluent households, who spend more on services and are likely to resume those activities once it is safe to do so.
NRF expects to reach its spending forecast regardless of whether Congress passes the $1.9 trillion stimulus package currently under consideration, but Kleinhenz said the measure could provide an additional boost to consumer spending as seen with other relief efforts over the past year.
Kleinhenz said the pace of growth could be “patchy” across the country given differences in demographics, industrial base and state or local government policies, but that there should be a “return to normalcy” beginning in the second quarter.