Optimism tempered somewhat by tariff worries

WASHINGTON — The National Retail Federation has revised its retail sales forecast for 2018, saying it now expects sales to increase 4.5% or more, up from its earlier projection of a year-on-year gain in the range of 3.8% to 4.4%.

“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,” Matthew Shay, NRF’s president and chief executive officer, said in a statement. “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, a tremendous amount of uncertainty about the second half remains. It could be a banner year for the industry, or we could keep chugging along at the current rate.”

Tariffs threaten to dampen consumer confidence, Shay warned.

“We don’t want to see these economic gains derailed by protectionist trade policy,” he asserted. “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. And just the mere talk of tariffs negatively impacts consumer and business confidence, leading to a decline in spending. It’s time to replace tariffs and talk of trade wars with diplomacy and policies that strengthen recent gains, not kill them.”

Retail sales were up 4.8% in the first six months of 2018 compared to a year earlier, NRF said. The trade group now expects the U.S. economy, as measured by gross domestic product, to grow at the higher end of the 2.5%-to-3% range it forecast earlier.

“Spending was weaker than expected at the beginning of the first quarter but has grown more rapidly since then,” said Jack Kleinhenz, NRF’s chief economist. “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.”

Kleinhenz said retail sales as calculated by NRF — which excludes automobiles, gasoline stations and restaurants — have increased year over year in all but three months since early 2010.