NRF lifts 2018 U.S. retail sales forecast on strong job market, tax reform

Reuters
A woman shops for gloves at a mobile vendor in Times Square in Manhattan, New York, U.S., December 28, 2017. REUTERS/Amr Alfiky

(Reuters) - The National Retail Federation on Monday raised its U.S. retail sales forecast for 2018, citing higher wages, gains in disposable income and a strong job market that have boosted consumer spending.

The trade body now expects retail sales for 2018, excluding automobiles, gasoline stations and restaurants, to rise a minimum of 4.5 percent over 2017, compared with the 3.8 to 4.4 percentage growth it forecasted earlier this year.

"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," NRF Chief Executive Officer Matthew Shay said in a statement https://nrf.com/media/press-releases/national-retail-federation-upgrades-2018-economic-forecast-says-tariffs-remain.

The industry group attributed its forecast raise to better-than-expected consumer spending in the first half of the year.

Unemployment in the United States is at its lowest in 50 years and industrial production is growing at some of the fastest rates for 20 years, helping U.S. consumer sentiment rise to multi-decade highs.

Several companies, including the world's largest private employer Walmart Inc (WMT.N) and Costco Wholesale Corp (COST.O), have used reforms in the U.S. tax code to award bonuses, benefits and hike wages for its employees.

"This is the best of times for retailers," said Ken Perkins, founder of research firm Retail Metrics.

Last year, U.S. retail sales rose 3.9 percent $3.53 trillion, exceeding NRF's forecast for a 3.2 percent to 3.8 percent rise.

NRF, however, cautioned that the tariff war between United States and China could lead to a rise in prices of day-to-day goods and a rise in global oil prices could dampen consumer confidence during the rest of the year.

"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," NRF's Chief Economist Jack Kleinhenz said.

(Reporting by Vibhuti Sharma in Bengaluru; Editing by Shailesh Kuber)