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Economic outlook has retailers feeling upbeat

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Retailers can expect no letup on competitive pressure in the year ahead. But as they continue to battle across formats and trade classes for market share, at least the economic pie they are fighting over appears likely to keep getting bigger.

That is good news for retailers for a couple of reasons.

On the political front, for example, most retailers are generally happy about the prospects of having Republicans retain control of Congress and the executive branch, believing that the party would continue to promote a “business friendly” agenda of lower taxes and fewer regulations. And while the Democrats are expected to make some gains in the midterm elections, Republicans are more likely to remain in charge of the legislature if the economy remains strong.

And from a business perspective, a strong economy would also mean that consumers have more money to spend in retail stores.

So far the economic outlook looks pretty good. The National Retail Federation (NRF) expects retail sales to increase this year between 3.8% and 4.4% over 2017. The trade association’s annual economic forecast also calls for online and other nonstore sales to grow between 10% and 12%. An overall rise of 4.4% would be the biggest increase since 2011, when retail sales surged 5%, according to the trade group.

Another positive development, from retailers’ perspective, comes courtesy of the tax reform bill Congress passed last year. Some large employers, including Walmart, announced wage hikes and bonuses that they said were made possible by the new tax law. That, coupled with lower rates for some middle-class Americans, could give consumers more money to spend.

Not all of that extra money will turn up in retail cash registers, though. According to this year’s tax refund survey by the National Retail Federation and Prosper Insights & Analytics, more Americans than ever plan to hold on to their tax refunds this year rather than spend the money.

Of the 65% of taxpayers expecting a refund, 49% say they will put it into savings. That’s up from 48% last year and the highest level in the 12-year history of the survey, NRF said.

But if those savings make consumers more confident about their financial well-being, that could be good news for retailers, politically and economically.


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