US retail sales are expected to grow at a faster rate than pre-pandemic levels this year, but concerns remain over the state of the economy and demand for goods.
“In just the past three years, the retail industry has experienced growth that would normally take almost a decade by pre-pandemic standards,” National Retail Federation chief executive Matthew Shay said during a webinar on the federation’s latest forecast. “While we expect growth to moderate in the year ahead, it will remain positive as retail sales stabilise to more historical levels.”
The value of retail sales is expected to grow 4%-6% in 2023, with sales in a range of $5.1trn-$5.3trn. That is below the 7% growth rate to $4.9trn in 2022, but ahead of the pre-pandemic average annual growth rate of 3.6%.
But with inflation running at around half the rate of sale growth, the volume of goods sold will grow at a far lower pace, reducing demand growth for containerised imports into the US market.
The federation projects full-year GDP growth of around 1%, which it said reflected a slower economic pace. Inflation was “on the way down” but would remain between 3% and 3.5% for all goods and services for the year.
Chief economist Jack Kleinhenz said that aggregate economic activity had held up well, despite restrictive monetary policy that had been implemented to curb inflation. But he warned that recent developments in the financial markets and banking sector, as well as some unresolved public policy issues, complicated 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,” he said. “While we expect consumers to maintain spending, a softer and likely uneven pace is projected for the balance of the year.”
The first quarter of the year had been buoyed by a strong labour market, wage growth and excess savings built up during the pandemic, he added. “These factors should support households as we move forward into 2023.”
Nevertheless, spending would likely be tempered as access to credit became more expensive and jobs growth slowed.
“It is too early to tell how the banking industry’s turmoil will have a ripple effect on consumption. Even if the current crisis subsides, there will be real effects on the economy, affecting business and consumer attitudes and behaviours.”
Ernst & Young chief economist Gregory Daco also warned that growth may be limited later in the year.
“The credit crunch that is going to come in the wake of this banking stress test episode is going to weigh on consumer spending and business activity,” he said. “But it is unclear yet to what extent.”
Other factors, such as unemployment and payroll growth, were showing weaker signals too. “This points to slower growth in consumer spending and income but overall does not indicate a high likelihood of a massive pullback over the next few months.”
Source: Lloyd's List
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