Slow growth is definitely better than no growth.
So sayeth the conventional wisdom. And more importantly, so sayeth the National Retail Federation who announced that it expects retail industry sales (excluding automobiles, gas stations and restaurants) to increase 3.1% in 2016. That’s .4% higher than the ten-year average of 2.7%, and considerably higher than the 2.1% growth the sector saw in 2015 vs. 2014.
Even better news if you’re an online retailer: Online retail sales for retail stores are expected to increase 6% to 9% this year, possibly tripling the growth rate of the entire sector.
According to Paula Campbell Roberts, executive director, research, at Morgan Stanley who spoke at a press panel at the NRF’s annual convention in New York, we can expect to see “sluggish growth for a long time, unless there is something on a global level that shocks the economy.”
So, basically, barring any major disasters things should be good for a while. So much for that rumored recession.
Cheap Gas, Low Unemployment are Big Factors in Growth of Retail Sales
Many economists have linked the uptick in retail spending to low gas prices, giving people more expendable income and thus boosting sales. Though the end of the year saw more people using that money for personal savings, the trend is expected to move more towards spending this year.
This is because unemployment continues to decrease, and as people feel more comfortable they can find work, they are more willing to spend. The economy is expected to add 190,000 jobs per month in 2016, which while slower than 2015’s rate is still a reason to be optimistic. And unemployment is expected to be at 4.6% by the end of the year, according to NRF. More jobs means more people with more money that they can spend in your retail business.
“Core sales” – a category of retail that excludes automobiles, gasoline, building materials, and food/beverage – is expected to increase 2.7%, down slightly from the 3% increase in 2015. Along with travel, this is one of the most closely watched economic indicators of consumer confidence, since the bulk of it is discretionary spending. But overall growth was still driven by building supply and garden centers, bars and restaurants, and clothing stores, the three leading categories in the industry.
If you’re saying to yourself “Well this should make up for that lackluster holiday season we just had,” then you’re not alone. Sales increased about 3% this past November and December, which was still below the predicted 3.7%. Some place the blame for this on holiday promotions beginning as early as October, spreading the spending out over a longer period of time.
Of course, much of this is contingent on gas remaining cheap and, as we’ve learned over the years, that’s never something to take for granted. But assuming NRF’s predictions hold true, this might be the right time to look at expanding your retail business. If the climate is right, and you want to make it happen, BFS Capital is always there to help finance your small business dreams.