Coming off a disappointing 2015 holiday season, the retail industry could benefit from a pick-me-up for the coming year ahead. However, for the time being, it appears retailers can expect more of the same.
Annual retail sales are expected to rise 3.1% in 2016, according to forecasts from the National Retail Federation (NRF). The sales growth projection would match NRF’s preliminary reports of 3.1% industry growth in 2015.
The good news is: expected sales growth exceeds the 10-year average annual growth rate of 2.7%. Non-store sales in 2016 are expected to grow between 6% and 9%, furthering the notion that e-Commerce will continue to have a greater influence on consumer purchasing decisions.
The slight increase in spending in 2015 could be attributed to lower gas prices and lower goods prices, suggested Matthew Shay, President and CEO of NRF, as consumers had greater discretionary income at their disposal.
“We recognize that consumers are doing things differently than they have in the past,” Shay said during a media briefing. “They’re paying down debt at a level that we haven’t seen since before the recession. They’re devoting more of their spending to experiences, whether through travel, leisure or hospitality. They’re spending on health care and investing in their homes. The consumers are in a much healthier place than they were just a few years ago, and they’re getting healthier every year that goes by, so the money is there. We also recognize that they aren’t going to spend unless they’re confident about the future.”
Numerous external factors are expected to affect consumer confidence going into 2016, including volatile Q1 stock market performance and economic uncertainty stemming from the upcoming presidential election.
Regardless of the potential roadblocks, NRF Chief EconomistJack Kleinhenz believes the U.S. consumer will continue to drive the global economy, due to heightened domestic demand and more rational spending habits. Economic growth as a whole is likely to range between 1.9% and 2.4% in 2016, according to NRF.
“Last year, personal consumption expenditures — when you take out inflation — increased 3.1%,” Kleinhenz said during the briefing. “That was actually the fastest since the recession recovery began. Consumers are returning to spending within their own means. Auto sales rebounded last year and were a large benefit to the broader economy. With job growth, home building rising and low interest rates, this 2016 economy will hold up and support further growth, especially for retail this year.”