The National Retail Federation has increased its retail sales forecast for 2018, despite concerns over the U.S.-China trade war.
The NRF now expects 2018 retail sales to increase at a minimum of 4.5 percent over 2017, instead of the 3.8 to 4.4 percent range forecast earlier this year.
“Higher wages, gains in disposable income, a strong job market and record-high household net worth have all set the stage for very robust growth in the nation’s consumer-driven economy,” NRF President and CEO Matthew Shay said in a press release. “Tax reform and economic stimulus have created jobs and put more money in consumers’ pockets, and retailers are seeing it in their bottom line. We knew this would be a good year, but the first half turned out to be even better than expected.”
However, there is “tremendous amount of uncertainty” about retailer performance in the second half of the year due to new tariffs being implemented on USD 34 billion (EUR 30 billion) of Chinese goods in July, as well as additional tariffs on USD 16 billion (EUR 14 billion) in Chinese goods set to go into effect on 23 August. And U.S. President Donald Trump has threatened yet another round of tariffs on US 200 billion (EUR 176 billion) in goods from China that would include a broader array of consumer items and is expected to be finalized in September.
“We don’t want to see these economic gains derailed by protectionist trade policy,” Shay said. “With retailers ramping up imports and stocking their warehouses before most of the proposed tariffs will take effect, an immediate impact on prices on consumer goods is unlikely, but that won’t last for long.”
Imports have been at record levels this summer as retailers bring merchandise into the country before the tariffs are enacted, according to NRF’s Global Port Tracker report. Still, the mere talk of tariffs “negatively impacts consumer and business confidence, leading to a decline in spending,” Shay said.
“It’s time to replace tariffs and talk of trade wars with diplomacy and policies that strengthen recent gains, not kill them,” Shay said.
NRF Chief Economist Jack Kleinhenz said, despite the tariffs, his group’s overall economic outlook is optimistic.
“Spending was weaker than expected at the beginning of the first quarter but has grown more rapidly since then and we continue to anticipate strong sales during the second half of 2018,” Kleinhenz said. “Despite this upgrade in our forecast, uncertainty surrounding the trade war and higher-than-expected inflation due in part to increased oil prices could make consumers cautious during the fall season.”
Total U.S. retail sales, excluding automobiles, gasoline, and restaurants, have grown year-over-year every month since November 2009, NRF said.
