Retailers predict continued slow sales this year

Retailers are estimating that the sluggish job market will continue hindering sales growth this year. 

In a report released Monday, the National Retail Federation predicted 3.4 percent growth in 2012 — to $2.53 trillion — which is below last year's pace, when sales expanded 4.7 percent.

“Over the last 18 months, retailers have been on the forefront of the economic recovery, creating jobs, encouraging consumer spending and investing in America,” said Matthew Shay, NRF's president and chief executive. 

"Retailers have played a key role in driving growth, but to continue this momentum we need Washington to act on proposals that will spur job creation and unleash the power of the private sector," he said at NRF’s 101st Annual Convention and Expo in New York. 

Shay is urging lawmakers to help private-sector growth by overhauling the corporate tax system to help businesses be more competitive, enacting sales tax legislation to ensure fairness between brick-and-mortar and online retailers and reforming the U.S. visa system so more foreign travelers can come to the United States to spend money and help spur growth. 

Shay and Terry Lundgren, chief executive of Macy's and NRF’s chairman, outlined the industry’s priorities in a letter to President Obama last week.

Overall, the retail industry is expected to expand at a faster rate than other sectors of the economy, as economists estimate that the nation's gross domestic product will increase between 2.1 to 2.4 percent.

Economists have offered mostly cautious forecasts for this year, saying that if job growth continues to expand like it did in December — 200,000 jobs were added to the economy — consumer spending could accelerate and lead to higher sales figures. 

Retailers ended last year on a strong note — holiday sales were up 4.1 percent over 2010 levels — and many factors will continue to influence the expected slowdown in consumer spending, but none are weighing more heavily on sales than the lack of jobs. 

Here are more details on NRF's forecast: 

Employment: The number of people out of work is at its lowest level in nearly three years — the rise in employment and hours worked should bolster income and spending.

Income growth: Consumers are constrained by modest growth in their wages. Congress will need to extend beyond the current two-month length the payroll tax cut and unemployment benefits and consumers will likely remain cautious until they are approved. Income is predicted to lag consumption on a year-over-year basis.

Housing: NRF expects home sales and construction to improve slightly in 2012 — some parts of the housing market hit historic lows in 2011 — as mortgage rates remain at the lowest levels in 50 years. While most of the economic reports dealing with housing have shown a little more strength, these reports should be treated with caution, as some of the improvement is due in part to unseasonably mild weather. 

Inflation: Increasing costs have been a drain on consumer purchasing power due to extraordinary agricultural commodity price inflation as well as high oil prices. NRF expects inflation to slow down near a 2 percent range. Rising gas prices could also put pressure on spending.

Consumer credit: Easier lending standards are expanding consumer credit. Revolving credit appeared to break out from its holding pattern showing a big surge in November, which indicates consumers have confidence to take on debt.

Consumer confidence: Confidence continues to rebound from August lows but remains fragile given volatile financial market conditions and anemic housing markets.