Retail sales are projected to grow at a potentially record rate during 2021, but the ongoing coronavirus (COVID-19) pandemic remains the biggest challenge for the year, according to the National Retail Federation (NRF).
“There is no doubt the economy is positioned for growth in 2021, but how much growth comes down to a single non-economic force – the coronavirus,” the federation’s Chief Economist Jack Kleinhenz said.
According to a recent NRF forecast, 2021 retail sales, excluding automobile dealers, gasoline stations and restaurants, are projected to grow 6.5 to 8.2 percent over 2020 to between $4.33 trillion and $4.4 trillion, including online sales between $1.14 trillion and $1.19 trillion.
This projected retail sales growth is expected to top the 2020 growth rate of 6.7 percent, which had topped a previous growth record of 6.3 percent set in 2004, despite the impacts of the pandemic.
The record growth rate in 2020 was aided primarily by the growth of online shopping, which increased 21.9 percent last year. It is now projected to grow 18 to 23 percent in 2021.
Kleinhenz attributed the projected growth rate for 2021 to the improving macroeconomic conditions as COVID-19 infections decline and distribution of vaccines becomes more widespread.
He added that 2020 saw a shift toward spending on goods rather than services, which normally make up 70 percent of consumer spending. However, some pre-COVID services spending will return in 2021, particularly among affluent households.
NRF expects to reach its spending forecast regardless of whether Congress passes the $1.9 trillion stimulus package currently under consideration. However, the stimulus could provide an additional boost to consumer spending.
Kleinhenz noted that there should be a “return to normalcy” beginning in the second quarter, though the pace of growth could be “patchy” across the country given differences in demographics, industrial base and state or local government policies.
The March issue of NRF’s Monthly Economic Review had revealed that the economy was entering its second year of strong savings, high stock values, increased home prices, enhanced government support and record-low interest rates despite the pandemic.
The NRF also expects the overall economy to gain between 220,000 and 300,000 jobs per month in 2021, depending on the pace of the overall economy in the second and third quarters.
Source: Read Full Article