NRF: Retail Sales Will Rise 3.4% in 2012

Retail industry sales will rise 3.4% to $2.53 trillion in 2012, according to the National Retail Federation.

Though many economists estimate that real U.S. GDP will rise approximately 2.1 to 2.4%, the NRF feels more optimistic, but believes retail will grow slightly lower than the pace of 2011, in which sales grew 4.7%.

Though retailers ended last year on a strong note with holiday sales rising 4.1% over 2010, many factors will continue to influence the expected slowdown in consumer spending, but none remain more cumbersome than the stalled unemployment rate and lack of newly-created jobs. A number of factors contributed to NRF’s 2012 economic forecast, including:

• Employment: The number of Americans out of work is at its lowest level in nearly three years, and the rise in employment and hours worked should bolster income and spending.

• Income growth: Consumers are constrained by modest growth in income. Congress extended the cuts in payroll taxes and unemployment benefits for only two months. While these provide a lift, and are likely, consumers may act cautiously until both are approved. Income is predicted to lag consumption on a year-over-year basis.

• Housing: While most of the economic reports dealing with housing have shown a little more strength, these reports should be treated with caution, as some of the improvement is due in part to unseasonably mild weather. NRF expects home sales and construction will improve slightly in 2012 with low interest rates and affordability at an almost 30 year high.

• Inflation: Increase costs have been a drain on consumer purchasing power due to extraordinary agricultural commodity price inflation as well as high oil prices due to global geopolitical tensions. NRF expects inflation to slow down near a two percent range. Rising gas prices may also put pressure on spending.

• Consumer credit: Easier lending standards are expanding consumer credit. Revolving credit appeared to break out from its holding pattern showing a big surge in November, which indicates consumers have confidence to take on debt.

• Consumer confidence: Confidence continues to rebound from August lows but remains fragile given volatile financial market conditions and anemic housing markets.

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