Coronavirus Disruption on US Retail Channel 'Less Severe Than Expected,' Says NRF
National Retail Federation CEO Matthew Shay downplayed the expected impact of the coronavirus on U.S. retailers, on a Wednesday 2020 forecast call with media. NRF forecast 2020 retail sales will grow 3.5-4.1% to more than $3.9 trillion, “despite uncertainty from the lingering trade war, coronavirus and the presidential election.”
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Preliminary 2019 results show retail sales grew 3.7% to $3.79 trillion, just under NRF’s 3.8% forecast. Online and other non-store sales were up 12.9% at $777.3 billion, ahead of NRF’s 12% growth forecast. Holiday spending Nov. 1-Dec. 31 grew 4.1%, Shay said.
Citing conversations with retail executives, Shay said news about the retail supply chain is “generally encouraging,” with reports some China plants are coming back on line and employees returning to work, after closures due to the coronavirus outbreak. Warning the virus' impact needs to be taken seriously, Shay also said the disruption appears “less severe than originally expected.”
Efficiencies in the supply chain put in place over the past couple of years helped minimize effects of the coronavirus for retailers, Shay said. Those efficiencies were hastened by “the disruption and uncertainty around trade policies in the U.S.,” including Section 301 tariffs on goods produced in China. “Somewhat counterintuitively, that emphasis has accelerated diversification away from the market in China when possible,” he said.
Shay wouldn’t speculate on the virus’ impact on the U.S. retail industry as the number of domestic cases increase. He referenced a Tuesday address by Anthony Fauci, director-National Institute of Allergy and Infectious Diseases at the National Institutes of Health, saying the virus in the U.S. is controlled and contained at the moment, but Americans should be making preparations for potential implications.
Underlying economic fundamentals remain strong, said NRF Chief Economist Jack Kleinhenz, noting 127 consecutive months of growth. NRF expects the overall economy to gain 150,000-170,000 jobs monthly this year vs. an average 175,000 in 2019, with unemployment, currently at 3.6%, staying around 3.5% during the year. Gross domestic product is likely to grow 1.9%, down from preliminary estimates of 2.3%, he said.
Though low unemployment and “steady wage growth” are giving consumers confidence to spend, Kleinhenz expects “moderating growth for GDP" this year, leading to a “downshift in consumers' spending for goods and services.” NRF’s estimate for personal consumption spending in 2020 is 2.3% vs. 2.6% for 2019.
Though consumers and small-business owners are confident about the economy, corporate CEOs remain cautious over trade policy, said Kleinhenz. Progress with the phase one trade agreement with China could boost the economy, while escalation of the trade war could discourage corporate investments, he said. The wide range of potential policy outcomes associated with November’s federal and state elections could cause consumers and businesses to be cautious.