US retail sales are forecast to grow 3.1% this year

US retail sales are forecast to grow 3.1% this year

US retail sales are forecast to grow 3.1% in 2016 as lower gas prices contribute to higher discretionary income for consumers to save, pay down debt and spend.

The projected increase from the National Retail Federation (NRF), which excludes automobiles, gas stations and restaurants, is above the ten-year average of 2.7%, but below 4.1% predicted for last year, which marked the biggest annual growth in four years. 

US retail sales to grow at highest rate since 2011

Meanwhile, non-store sales are expected to rise 6-9%. 

"Wage stagnation is easing, jobs are being created and consumer confidence remains steady, so despite the headwinds our economy faces from international developments — particularly in China — we think 2016 will be favourable for growth in the retail industry," said NRF president and CEO Matthew Shay. 

"All of the experts agree that the consumer is in the driver's seat and steering our economic recovery. The best thing the government can do is stay out of the way, stop proposing rules and regulations that create hurdles toward greater capital investment and focus on policies that help retailers provide increased income and job stability for their employees." 

NRF chief economist Jack Kleinhenz added that although the US economy had a "bumpy ride" in 2015, it continued to reduce unemployment, raise wages and actually increase real GDP by 2.4%. 

"Lower gas prices are creating more discretionary income to save, pay down debt and spend on travel, eating out and personal services," he said. "Retailers have benefited as well, and continue to find ways to compete and succeed in a very cost-conscious environment." 

Economic growth, the NRF believes, should be more of the same and uneven, and is likely to range from 1.9-2.4% this year. While expected employment gains of around 190,000 on an average monthly basis is down from 2015, it is consistent with the labour market growing near its underlying trend. 

Prospects for consumer spending are straightforward, the NRF said, as more jobs equals more income, which equals more spending. However, spending will come largely from the growth in jobs and not as much from increased wages.