NRF: February retail sales rose year-over-year; annual 6-8 percent growth projected

Retail sales showed a strong year-over-year gain in February, but the monthly pace slowed compared with January as inflation drove up prices and lingering effects of the COVID-19 omicron variant affected the supply chain, according to the National Retail Federation (NRF).

“Retail sales data continues to show impressive consumer resilience,” said Matthew Shay, NRF President and CEO. “Despite all that’s been thrown at them including inflation, supply chain constraints, market volatility and significant geopolitical events, consumers remain able and willing to spend. Retailers are nimble and are dedicated to serving their customers with great experiences, great products and services at the best possible prices they can. Our outlook remains constructive, with solid retail sales growth for all of 2022 increasing by 6 percent to 8 percent. Consumer financial health can continue if current pressures in the economy are moderated by sound policy decisions that do not compound the challenges our economy is already facing.”

“February retail sales reflected continued strong labor market conditions but were certainly affected by higher consumer prices,” said Jack Kleinhenz, NRF Chief Economist. “With the highest levels in 40 years, there is no doubt continued increases in inflation are hitting household purchasing power and likely restraining spending. We shouldn’t be surprised by the slower pace of sales given that purchases had surged in January and the upward revisions made to those numbers. And the double-digit year-over-year increase was expected given that much of the economy was still in stay-at-home mode a year earlier. February’s sales are another sign of the economy’s resilience, but the conflict in Europe is an increasing headwind that could dampen spending around the globe.”

The U.S. Census Bureau said overall retail sales in February were up 0.3 percent seasonally adjusted from January and up 17.6 percent year-over-year. That built on a monthly increase of 4.9 percent in January over December – more than a percentage point higher than the original estimate of 3.8 percent – and January’s 14 percent increase year-over-year. Despite occasional month-over-month declines, sales have grown year-over-year every month since June 2020, according to Census data.

NRF’s calculation of retail sales – which excludes automobile dealers, gasoline stations and restaurants to focus on core retail – showed February was down 1 percent seasonally adjusted from January’s revised numbers but up 13 percent unadjusted year-over-year. In January, sales were up 5.9 percent month-over-month and up 9.6 percent year-over-year. NRF’s numbers were up 11.8 percent unadjusted year-over-year on a three-month moving average as of February.

February sales were down in two-thirds of categories on a monthly basis but up across the board on a yearly basis, with year-over-year gains led by clothing and building materials stores and online sales. Specifics from key sectors include:

• Clothing and clothing accessory stores were up 1.1 percent month-over-month seasonally adjusted and up 31 percent unadjusted year-over-year.
• Building materials and garden supply stores were up 0.9 percent month-over-month seasonally adjusted and up 14.9 percent unadjusted year-over-year.
• Online and other non-store sales were down 3.7 percent month-over-month seasonally adjusted but up 13.9 percent unadjusted year-over-year.
• General merchandise stores were down 0.2 percent month-over-month seasonally adjusted but up 12.6 percent unadjusted year-over-year.
• Sporting goods stores were up 1.7 percent month-over-month seasonally adjusted and up 11.6 percent unadjusted year-over-year.
• Health and personal care stores were down 1.8 percent month-over-month seasonally adjusted but up 8.7 percent unadjusted year-over-year.
• Grocery and beverage stores were down 0.5 percent month-over-month seasonally adjusted but up 8 percent unadjusted year-over-year.
• Furniture and home furnishings stores were down 1 percent month-over-month seasonally adjusted but up 7.4 percent unadjusted year-over-year.
• Electronics and appliance stores were down 0.6 percent month-over-month seasonally adjusted but up 2.6 percent unadjusted year-over-year.

Forecast for 2022

Earlier this week, the NRF issued its annual forecast, anticipating that retail sales will grow between 6 percent and 8 percent to more than $4.86 trillion in 2022. The announcement was made during NRF’s annual   virtual event where retail industry leaders discussed the strength of the consumer economy and the future of retail.

“NRF expects retail sales to increase in 2022, as consumers are ready to spend and have the resources to do so,” said Shay. “We should see durable growth this year given consumer confidence to continue this expansion, notwithstanding risks related to inflation, COVID-19, and geopolitical threats.”

NRF forecasts 2022 retail sales will total between $4.86 trillion and $4.95 trillion. The numbers exclude automobile dealers, gasoline stations, and restaurants. Non-store and online sales year-over-year, which are included in the total figure, are expected to grow between 11 percent and 13 percent to a range of $1.17 trillion to $1.19 trillion as consumers continue to utilize eCommerce.

The 2022 figure compares with a 14 percent annual growth rate in 2021, the highest growth rate in more than 20 years. This year’s sales forecast is notably above the 10-year, pre-pandemic growth rate of 3.7 percent.

NRF anticipates strong job and wage growth and declining unemployment. The organization projects full-year GDP growth will be slower this year, around 3.5 percent, given the surge of inflation and tightening of monetary policy, and less fiscal stimulus.

Retail sales are expected to remain strong as the economy opens further in the coming months, but there is considerable uncertainty this year that NRF will continue to monitor closely.

“Most households have never experienced anything like this level of inflation, and it is expected to remain elevated well into 2023,” said Kleinhenz. “In addition to inflation, the forces impacting the economy include COVID-19 impacts, international tensions and policy variability.

Kleinhenz added, although a roller coaster ride of incoming data is expected in the next few months, consumer fundamentals remain in place. Household finances are healthy and strong job and wage growth should support solid growth for consumer spending for 2022.