The National Retail Federation is projecting retail industry sales will decrease 0.5% from last year as many of the same factors putting pressure on consumer spending in 2008 continue into this year.
“I’m not optimistic about consumer spending in the term,” said Rosalind Wells, chief economist at NRF, during a conference call with reporters. In fact, this is the first time that the NRF has projected a decline in sales since it began projecting sales in 1995.
Job losses, modest if any income gains and the continued collapse of the housing market will result in “consumer spending continuing to contract for a couple of quarters before making small gains,” Wells said. During the fourth quarter of 2008, retail sales declined 1.7%, according to the NRF.
In this environment, discount retailers will continue to out-perform the rest of the retail industry. In addition, “online shopping will do better than bricks-and-mortar stores, but even it will feel the negative effects” of a poor economy, Wells said.
The NRF is expecting retail sales, which exclude automobiles, gas stations and restaurants, will decline 2.5% in the first half of 2009. There will be some improvement in the third quarter as whatever government stimulus package is decided upon starts to make its way through the industry, with sales decreasing just 1.1%.
By the fourth quarter, sales are expected to improve 3.6% due to easy comparisons with last year’s poor results as well as a strengthening economy, according to the NRF.
As part of any stimulus package, NRF is proposing three 10-day national sales tax holidays throughout 2009 to further encourage consumers to funnel their dollars into the retail sector.
“We think this can help consumers psychologically get back into the stores,” said Ellen Davis, VP at the NRF, adding that retailers in the states that currently offer sales tax holidays report consumer spending increases upwards of 35% during these events. Currently, 17 states and the District of Columbia offer sales tax holidays. This would be the first time that something like this would be done on a national level.
