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Retailers Doing Better Than Expected: NRF

Trade group raises full-year sales projection to 4.5 percent or more.

The positive impact of tax reform and other economic stimuli has prompted the National Retail Federation (NRF) to raise its full-year outlook for retail sales growth to 4.5 percent or better year over year.

The trade association had previously predicted sales gains in the 3.8 to 4.4 percent range.

The new projection follows a 4.8 percent increase for the first six months of the year, the NRF said.

“We knew this would be a good year, but the first half turned out to be even better than expected,” observed Matthew Shay, NRF president/CEO.

Shay attributed the glad tidings to higher wages, gains in disposable income, a strong job market and record-high household net worth. “Tax reform and economic stimulus have created jobs and put more money in consumers’ pockets, and retailers are seeing it in their bottom line,” he said.

Still, Shay warned that the money train could get derailed by tariffs, which may dampen consumer confidence. While no immediate price hikes are expected, as retailers have bulked up on inventory before most of the proposed duties take effect, “Just the mere talk of tariffs negatively impacts consumer and business confidence, leading to a decline in spending,” he said.

See: ‘Tariffs Are Taxes, Plain And Simple’

Tariffs of 25 percent on $34 billion worth of Chinese goods took effect in July, and another $16 billion in Chinese imports are expected to be affected this month, although both lists include a relatively low number of finished consumer goods. Another round of tariffs on $200 billion in products from China that would include a broader array of consumer items is currently under consideration and is expected to be finalized in September.

“It’s time to replace tariffs and talk of trade wars with diplomacy and policies that strengthen recent gains, not kill them,” Shay opined.

Imports, meanwhile, have been at record levels this summer as retailers bring merchandise into the country before the tariffs can take effect, according to NRF’s Global Port Tracker report.

Related: Appliance Shipments Slump After Pre-Price-Hike Buildup

Added NRF chief economist Jack Kleinhenz, “Despite this upgrade in our forecast, 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.”

The NRF forecast excludes automobiles, gas stations and restaurants.