Retail Sales Growth Slows
Although consumers have propped up the economy for the past
year, the party may be coming to an end. The National Retail
Federation (Washington) recently revised its 2005 sales forecast
based on new merchandise categories and a slowing economy, and
now says retail industry sales will increase a modest 4.8 percent
this year.
Retail industry sales grew a solid 7 percent in 2004—the
highest growth rate since 1999.
Retail sales rose 5.4 percent in the first quarter. However,
at press time, NRF forecast 5 percent gains in the second
and third quarters and a 4.1 percent gain in the fourth quarter.
“The indomitable consumer has kept on spending in spite
of high levels of debt and extremely low savings, but this
pace cannot continue much longer,” said Rosalind Wells,
chief economist for the NRF. “In addition to tough comparisons,
which will plague the retail industry for most of the year,
consumers will be stretched thin from rising interest rates,
high energy prices and modest gains in employment and income.”
Business investments, which have increased substantially,
may represent the economy’s one bright light. Many companies
with healthy profits and good cash flow are making large productivity-enhancing
investments.
According to NRF, retailers that may be particularly challenged
include discounters, whose shoppers are the most affected
by higher gas prices, and department stores, which are still
struggling to define themselves.
NRF, the world's largest retail trade association, represents
all retail formats and channels of distribution including
department, specialty, discount, catalog, Internet and independent
stores. [July 2005 PET AGE]
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