NRF Upgrades 2021 Retail Forecast Based on 'Energetic' Economy
Buoyed by a more “resilient economy” than expected at its February forecast, plus higher COVID-19 vaccination rates and government stimulus, the National Retail Federation upped its 2021 forecast on Wednesday to $4.44 trillion-$4.56 trillion, for 10.5%-13.5% sales growth. The trade association forecast 6.5%-8.2% growth to $4.3 trillion-$4.4 trillion in February (see 2102240038).
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Non-store and online sales, included in the total, are expected to grow 18%-23% to $1.09 trillion-$1.13 trillion, NRF said. The updated total retail sales figure compares with $4.02 trillion last year, including $920 billion from purchases made through non-store and online channels.
NRF Chief Economist Jack Kleinhenz used terms “strong,” “energetic” and “impressive” to describe economic growth, the fastest the country has seen since 1984, and much more brisk than analysts believed possible a year ago. Though a shift from goods to services will accompany consumer spending growth, retail has benefited, which will boost employment rates and income, leading to a “virtuous cycle” of more spending, said the economist.
Though business and consumer confidence has improved since earlier in the pandemic, it has recently slipped, likely due to inflation concerns, said Kleinhenz. NRF expects 2.4% inflation growth this year as measured by the personal consumption expenditures index, a half-point higher than assumed in February. Other risks include a “step-up in commodity prices,” supply chain disruptions and labor market scarcity.
Monetary policies have lifted personal income, “more than replenishing what was lost” in March-April 2020, Kleinhenz said, creating an “overabundance of purchasing power.” The economy is 0.9% below its pre-pandemic level at the end of 2019, with pre-pandemic output levels expected to return this quarter, he said. April retail sales were level with March, showing “unprecedented growth” from “pent-up demand” as the economy reopens, said Kleinhenz. NRF expects 7.5% real personal consumption expenditure growth for goods and services vs. 4.5% at the end of January.
NRF CEO Matthew Shay introduced a panel on changing consumer priorities, noting that for many consumers today, aligning with a retailer isn’t just about products and price but also about the “mission and the purpose” of the companies they patronize. Some consumers want companies to take a stand and speak up about political and social issues that are important to them, but widely diverse opinions make taking a stand on issues “complicated” and “challenging,” said TJL Consulting CEO Terry Lundren.
Market research firm GfK has been monitoring the rise in consumer concern about social responsibility in the past few years and how it has put a stronger emphasis on community, with consumers increasingly saying they want to engage with people who share their beliefs, said Vice President Rachel Bonsignore. Support for small businesses has grown as a result, she said. With values on inequality and social tolerance on the rise, racial intolerance is becoming more of a priority for many people, making it an “imperative for brands to address,” she said.
A May Ernst & Young survey found consumers are focused on prioritizing key values, with affordability the top concern for 31% of respondents, followed by personal and family health at 24%, said Karen Benway, consumer market leader-East region. But many consumers are becoming more purpose-driven and want to know how retailers are positioning their values on diversity and integrity of the employee base, she said.
On whether there are topics that most people agree on amid an atmosphere of polarized political and social views, Bonsignore cited climate concerns and sustainability as issues with generally broad support. But fragmentation in the consumer base creates more “nuance and complexity” on what consumers want from brands, she said. People are showing less interest in learning about points of view different from their own, she said. For those who lean more conservative or liberal, “there’s a lot of disagreement about how strongly brands need to play a role in standing up for social or political issues.”
Retailers have to look at the role they play in the heightened polarized environment, Bonsignore said. That could include being “really clear about who your target customers are and how you want to align with them ideologically but also being comfortable with losing some customers, too.” The post-pandemic age offers opportunities to help imagine a better world vs. returning to normal, she said.