This year could see record sales growth, but the economy still hinges on the COVID-19 pandemic, said Jack Kleinhenz, chief economist for the National Retail Federation (NRF), in the March issue of NRF’s Monthly Economic Review.
“There is no doubt the economy is positioned for growth in 2021, but how much growth comes down to a single non-economic force—the coronavirus,” Kleinhenz said. “I am optimistic about improving macroeconomic conditions as COVID-19 infections decline and distribution of vaccines becomes more widespread. Yet the road is never straight, and we have challenges ahead. The pandemic remains the largest uncertainty and the biggest risk the economy faces in 2021.”
The economy, Kleinhenz continued, is entering its second year of strong savings, high stock values, increased home prices, enhanced government support and record-low interest rates despite the pandemic. Employment and wages are growing, and consumers have “plenty of purchasing power” that will combine with pent-up demand to provide “accelerants for growth,” Kleinhenz added.
Based on those and other factors, NRF officials forecasted that 2021 retail sales—excluding automobile dealers, gasoline stations and restaurants—will grow between 6.5 percent and 8.2 percent over 2020 to between $4.33 trillion and $4.4 trillion. That could top 2020’s growth of 6.7 percent, which broke the previous record of 6.3 percent set in 2004 despite the pandemic, according to officials.
The pandemic has helped the growth of online shopping, which increased 21.9 percent last year and is expected to grow between 18 percent and 23 percent this year, officials noted. Online and other non-store sales, which are included in the total retail sales forecast, are expected to reach between $1.14 trillion and $1.19 trillion. Kleinhenz said many consumers who had not tried e-commerce before the pandemic are likely to continue shopping online.
Largely because of COVID-19’s impact on the ability of the public to travel, go out to dinner or attend entertainment and sporting events, 2020 saw a shift toward spending on goods rather than services, which normally make up 70 percent of consumer spending, officials said.
Kleinhenz said he expects retail to continue to benefit from that shift, but said some pre-COVID services spending will return, particularly among affluent households, who spend more on services and are likely to resume those activities once it is safe to do so.
The pace of growth could be “patchy” across the country given differences in demographics, industrial base and state or local government policies, Kleinhenz noted, but that there should be a “return to normalcy” beginning in the second quarter.
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