Strong retail sales gains in the first half of this year have prompted the National Retail Federation to revise its 2004 forecast for GAFS sales (general merchandise stores, apparel stores, furniture and home furnishings stores, electronics and appliances stores, and sporting goods, hobby, book and music stores). According to its forthcoming Retail Sales Outlook report, NRF has revised its 2004 forecast from 5.0% growth to 6.0% growth due to phenomenal 9.0% GAFS sales growth in the first five months of this year. GAFS sales increased 3.9% in 2003.
A long-awaited turnaround in employment has been the newest economic indicator to fall into place, said NRF Chief Economist Rosalind Wells. After the creation of 1.3 million new jobs in the first six months of 2004, the importance of renewed job growth lies in its impact on consumer income. “Rising employment is lifting wage and salary income which will, in turn, increase total consumer income,” said Wells. “Strengthening income is helping to keep consumers whole and is negating some effects of higher gasoline and food prices.”
Though the employment situation has rebounded, new concerns, primarily inflation and rising interest rates, have taken its place. Though inflation has risen as the economy has firmed, NRF believes that inflation will be contained due to a slower rate of economic growth and continued high productivity. “Rising interest rates and moderate inflation are the logical consequence of a rapidly-growing economy and, at this point in time, are not alarming nor will they impinge on sustainable growth,” Wells said.
According to NRF, GAFS sales jumped 9.9% in the first quarter of 2004. Second quarter sales are forecast to increase 7.0%. As 2004 continues, year-over-year comparisons will become more difficult and the rate of growth that retailers have seen will be harder to achieve, Wells said. Third and fourth quarter gains will range between 4.0% to 4.5%.
