Forecast Calls for 4-Percent Retail Growth in 2011

Retailers Expecting Bounce-Back Year in 2011

by Doug Desjardins

While retailers are still wary of predictions about a retail recovery, new numbers from the National Retail Federation (NRF) provide the strongest indication yet that a retail rebound has arrived.

The Retail Sales Outlook report released by the NRF in February calls for a 4-percent increase in retail sales: $2.47 trillion in 2011, based in large part on economic indicators that show the economy is finally on the rebound.

If those projections pan out, sales will be slightly better than the 3.7-percent increase in retail sales in 2010 and a big improvement over the 2.7-percent decline in sales in 2009. The increase predicted for 2011 would also be made against stronger comparisons than gains in 2010.

“With retailers leading the charge, the economic recovery appears to be gaining some steam,” said NRF president and CEO Matthew Shay. “The fate of the Main Street resurgence ultimately rests with policy makers on Capitol Hill. As Congress begins tackling key issues like deficit reduction and tax reform, it is critical we support policies that encourage job creation, consumption and business investment.”

The NRF based its forecast on seven consecutive months of retail sales growth dating back to the summer of 2010 and a strong holiday sales season that generated a 5% increase in sales. “Consumers have a lot of spending power they’ve been sitting on, as evidenced in part by strong holiday sales,” said NRF vice president Scott Krugman.

There are other signs providing retailers with a reason to be optimistic. A study from REIS Inc. found that retail vacancy rates started to decline in late 2010 and are expected to continue to drop through 2011, despite the closing of hundreds of Blockbuster Entertainment stores and a new wave of store closings due soon as a result of the Borders Group bankruptcy filing this month.

But there are potential problems that could slow the recovery. Food inflation has kicked in due to increased commodity costs. Gas prices also continue to rise. In mid-February, the national average price per-gallon was $3.15, 54 cents higher than it was at this time last year. And with instability in the Middle East, some experts are predicting that gas prices could hit $4 a gallon again this summer in a repeat of the gas spike of 2008.

The NRF also noted that unemployment remains high and that “small businesses continue to hold back on hiring and expansion plans” due to high unemployment figures.

Slow January sales are also a concern. According to the U.S. Commerce Department, U.S. retail sales rose just 0.3% in January, the lowest increase since monthly gains started last July. The sales increase was only half the modest 0.6% gain analysts were expecting.

Resources

Retailers Forecast 4 Percent Sales Growth for 2011

U.S. Retail Sales Expected to Show Solid Growth Despite Challenges

U.S. Retail Sales Increase 0.3% in January