Expect slow and steady retail growth in 2007: NRF

NEW YORK – Retail industry sales in 2007 will increase 4.8 percent from last year, according to the National Retail Federation’s forecast at its annual show in New York.

Per its quarterly “Retail Sales Outlook” report, the NRF expects a subdued first half of economic growth to give way to accelerated sales in the second half of the year as the economy continues with a slow housing market, but positive holiday sales.

“Consumer spending is still the strongest factor in the economy, but the soft housing market has restricted dollars that consumers have to spend,” said Tracy Mullin, president/CEO of NRF.

Retail sales increased 6.3 percent in 2006, which was stronger than expected, fueled by consumer spending in the first half of the year. As expected, sales weakened in the second half of the year, as consumer spending was challenged by the slowdown in the housing market.

As a result of the slowdown in housing, sales at retailers who sell building materials and garden equipment saw a sharp downturn during the year. Strong gains in the beginning of 2006, which were up 20 percent from 2005 early in the year, turned to 4.3 percent by the end of the year. Furniture stores also saw an 8 percent sales gain in the first half of 2006, and ended the year with a 2.5 increase from 2005.

Categories that fared well in 2006 include apparel and accessories, health and beauty, and food and beverage, which maintained steady gains of about 5 percent for the year.

In 2007 it is expected that retailers catering to the lower and mid-level income customer will find it more difficult to increase sales over 2006 due to the soft housing market.

However, according to the report, retailers can expect the current retail trends of luxury good sales and online shopping to continue to gain throughout 2007. Online sales steadied in each quarter of 2006, averaging13 percent.

“With the popularity of the Internet and the improvements that retailers are making on their sites, I’m still looking for double-digit gains this year,” Ms. Mullin said.

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