The outlook for the U.S. economy may still be uncertain, but conditions for retail appear positive.
“Wage stagnation is easing, jobs are being created and consumer confidence remains steady, so despite the headwinds our economy faces from international developments—particularly in China—we think 2016 will be favorable for growth in the retail industry,” NRF president and CEO Matthew Shay said.
Separately, but also on Wednesday, Federal Reserve Board Chair Janet Yellen shared her warnings on the U.S. economic outlook as she delivered the Fed’s semiannual Monetary Policy Report to Congress.
The Fed bumped interest rates up in December for the first time in nearly a decade from 0-0.25% to between 0.25-0.50%, and the world has been waiting to see whether further increases will come to pass.
“Financial conditions in the United States have recently become less supportive of growth, with declines in broad measures of equity prices, higher borrowing rates for riskier borrowers and a further appreciation of the dollar,” Yellen said in prepared remarks before the House of Representatives. “These developments, if they prove persistent, could weigh on the outlook for economic activity and the labor market, although declines in longer-term interest rates and oil prices provide some offset. Still, ongoing employment gains and faster wage growth should support the growth of real incomes and therefore consumer spending, and global economic growth should pick up over time, supported by highly accommodative monetary policies abroad.”
Despite last year’s volatility, real GDP went up 2.4% and those lower oil prices helped pad consumers’ pockets with enough cash to save some, spend some and pay down debts.
“Retailers have benefited as well, and continue to find ways to compete and succeed in a very cost-conscious environment,” NRF chief economist Jack Kleinhenz said.
NRF expects economic growth to be in the 1.9% to 2.4% range this year, unemployment to drop to 4.6% (from its current 4.9% as of January) with roughly 190,000 jobs added monthly, on average. Consumer spending will see a resulting uptick but the spending will come more from the job growth than increased wages.
“All of the experts agree that the consumer is in the driver’s seat and steering our economic recovery,” Shay said. “The best thing the government can do is stay out of the way, stop proposing rules and regulations that create hurdles toward greater capital investment and focus on policies that help retailers provide increased income and job stability for their employees.”