In a post dated April 10 on unitymarketingonline.com, Pam Danziger, founder of Unity Marketing, reports on the National Retail Federation’s retail forecast for 2023. The forecast anticipates retail sales growth to exceed the 3.6 percent average growth level recorded from 2013 through 2019 — the pre-pandemic years. Terming the forecast reassuring, Danziger notes that while consumers have kept retail sales resilient, they may be forced to adjust to a new financial reality. “And it won’t be good for retail,” she writes.
According to NRF president and CEO Matthew Shay, retail sales will grow between 4 percent and 6 percent in 2023, moderating in the year ahead but remain positive. Jack Kleinheinz, The NRF’s chief economist had a somewhat less rosy picture to paint, Danziger writes. According to Kleinheinz, “The economy proved pretty resilient in the second half of 2022. Looking forward, the resilience looks to be short-lived as the blue-chip consensus forecast for GDP is around 1 percent. That’s about half of 2022’s rate of growth.”
Kleinheinz also pointed out that many of the data points factored into the retail forecast are going in the wrong direction: slowing job growth, rising unemployment, higher credit interest rates, and nagging inflation, which will continue the be a drain on consumers’ wallets. He added that developments in the financial markets and banking sector complicated the forecast.
A month later, on May 8, Danziger’s post, again on unitymarketingonline.com, opens on a rather bleak note. This time she comments on the Census Department’s “depressing” March retail sales report and news from the Bureau of Economic Analysis. The former reported February seasonal-adjusted retail food service sales revised downward to -02 percent from January and March down a further 1 percent.
The Bureau of Economic Analysis released some information, which Danziger considers sobering. The bureau reported that personal consumption expenditures (PCE) on goods dropped 0.4 percent in March after a 0.3 percent decline in February. These expenditures reflect durable goods (spending down 0.8 percent) and non-durable goods (spending down 0.1 percent).
Consumers have not lost the inclination to spend, but it is slowing, writes Danziger. The PCE price index remains at 4.2 percent in March but dropped from 5.7 percent in November 2022. She points out that the March personal savings rate increased to 5.1 percent compared to 4 percent in the fourth quarter of 2022. The conclusion: people are saving more cash for bad times ahead. All of this might be good news to the policy experts intent on quashing inflation, she writes, “but it should send shivers up the spine of the nation’s retailers.” The information in the May 8 post certainly lends some credence to the cautionary note she sounded in the April 10 post.
The recession is already here; no, but it is coming; there will no recession; we’re expecting a soft landing; oh boy, no, it will be catastrophic. That nearly covers the range of opinions the pundits hold forth. One can be relied upon as much as the next. Whichever opinion lies closest to your own line of thinking, know this: consumer confidence will play a huge role in whatever outcome eventuates.