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Retail Sales To Improve In 2nd Half Of ’09: NRF

Washington — Retail sales are expected to begin to rebound by the second half of the year, according to a recent economic forecast from The National Retail Federation (NRF).

The trade group’s quarterly Retail Sales Outlook report, which projects retail industry revenue (excluding car dealerships, gas stations and restaurants), forecasts a 3.6 percent increase in fourth quarter sales due to a strengthening economy and easy year-over-year comparisons.

Sales declines will begin to slow in the third quarter, when retail revenues will decrease just 1.1 percent, the report said.

In the meantime, first-half sales are expected to decline 2.5 percent as last year’s economic weakness carries into the first six months of 2009 and consumers continue to shift their spending priorities. Total 2009 sales are projected to slip 0.5 percent, according to the NRF forecast.

“Most of the consumer behavior we saw in 2008 will continue well into this year,” said NRF chief economist Rosalind Wells. “Shoppers will be seeking value and trading down to discount and off-price retailers in order to stretch their purchasing power.”

Separately, the NRF told the Senate today that the economic stimulus legislation now under consideration fails to do enough for consumers, and repeated its call for a series of national sales tax holidays intended to jumpstart spending.

“While the legislation currently under consideration includes a number of provisions designed to produce long-term economic growth and job creation, we are extremely concerned that it does not do enough to immediately stimulate consumer spending or to preserve the tens of millions of jobs that consumer spending supports,” argued Steve Pfister, senior VP of the trade association. “With consumer spending representing two-thirds of GDP, it is difficult if not impossible to foresee an improvement to overall economic growth until consumers regain confidence and resume spending.

Pfister’s comments came in a letter to members of the Senate, which is currently debating amendments to the American Recovery and Reinvestment Act of 2009, the package of economic stimulus measures passed by the House last week.

“Before concluding your deliberations on stimulus legislation,” he wrote, “we urge you to include measures that would provide an immediate and substantial boost to consumer confidence and spending. We believe national sales tax holidays would be a powerful and cost-effective tool to achieve that goal. Long-term economic stimulus is critically important, but immediate economic stimulus is absolutely essential.”

NRF proposed in December that a series of national sales tax holidays be held during March, July and October 2009, each lasting 10 days including two weekends. Tax-free treatment would apply to all tangible goods subject to state sales tax, except tobacco and alcohol, ranging from retail merchandise and restaurant meals to automobiles. The federal government would reimburse the 45 states that have sales taxes for the lost revenue, and would provide the five states without a sales tax (Alaska, Delaware, Montana, New Hampshire and Oregon) with comparable revenue based on population.

“Retailers’ considerable experience with sales tax holidays has shown that they provide a substantial inducement for people to shop,” Pfister observed. “The increased sales resulting from these holidays would provide a direct infusion of liquidity into the economy, benefiting consumers as well as cash-starved states, which have seen a precipitous decline in sales tax revenues. Furthermore, sales tax holidays would help preserve and create significant numbers of jobs throughout interrelated sectors of the economy including the retail, manufacturing and transportation industries.”

NRF estimates that the proposed tax holidays could save consumers nearly $20 billion, or almost $175 for the average family, based on the $236 billion in sales tax collected nationwide each year. Beyond consumers saving money on already-expected purchases, retailers have reported sales increases of 35 percent to 40 percent from state-level tax holidays that have become popular in recent years.

The NRF proposal comes as the retail industry faces one of its most difficult years on record. Its prediction that retail sales will end the year down 0.5 percent from 2008 levels represents the first year-to-year decline since it began forecasting results in 1995. In addition, the retail industry lost 579,000 jobs in 2008 and is continuing to see job losses this year.