The retail industry could receive a big boost this year due to the increasingly rapid rollout of vaccines and restless consumers wanting to spend money they’ve stockpiled during the pandemic.
Retail sales could grow between 6.5% and 8.2% this year to more than $4.33 trillion, the National Retail Federation (NRF) said in its annual forecast released Wednesday, far outpacing the 4.5% average growth the last five years.
Growth in the retail industry has been healthy in recent years, but the 2021 forecast is “in another category altogether,” said NRF President and CEO Matthew Shay, adding that, “we’re optimistic the economy will experience its fastest growth in two decades.”
The last time the retail industry grew anywhere close to this pace was when it recorded a 6.3% increase in sales in 2004. But that doesn’t account for 2020, which the NRF says may have eclipsed that figure.
NRF’s preliminary retail sales data for last year shows a 6.7% increase over 2019, to $4.06 trillion. That number would nearly double NRF’s 2020 forecast of 3.5% growth, made before the onset of the global pandemic.
Much of 2020’s growth came from online sales, which jumped 21.9% last year to $969.4 billion. NRF expects similar growth in e-commerce this year, with online sales continuing to be a key part of the retail industry even if the economy opens up more later in the year.
NRF based their forecast on economic data showing that U.S. consumers have a lot of cash on hand that they are looking to spend. Saving reached record rates in 2020, but consumers surveyed by the Federal Reserve Bank of New York earlier this year said they expect to increase year-ahead spending by 4.2%.
And spending has picked up already, with retail and food sales jumping up 5.3% in January, the first month-over-month gain in four months. Economists said government support, like stimulus checks, helped spur the increase.
With consumer spending typically accounting for more than two-thirds of the U.S. economy, any increase in retail sales would be a good sign for the economy as a whole.
But, as with any forecast made amid a pandemic, NRF warned there are uncertainties that could change the actual outcome.
“There’s light in the tunnel but we still have a lot to move through,” NRF chief economist Jack Kleinhenz said.