US retail sales are projected to grow between 6.5% and 8.2% to more than $4.33 trillion in 2021. According to the National Retail Federation’s annual forecast, pent-up demand, vaccine distribution and healthy consumer fundamentals are projected to drive higher economic growth, retail sales and consumer spending.
In 2021, NRF projects retail sales to range between $4.33 trillion and $4.4 trillion. Of this, online sales are expected to grow 18-23% to $1.14 trillion to $1.19 trillion.
The COVID-19 pandemic drove a rapid shift to ecommerce during 2020 causing many retailers to accelerate their digital transformation over a couple of months which otherwise would have taken a few years. Retailers saw their digital sales surge, particularly during the holiday season as people did more of their holiday shopping online.
The report states that retail sales rose 6.7% year-over-year to $4.06 trillion in 2020 in spite of the pandemic. This number was higher than the 3.9% growth seen in 2019, and nearly double the growth of at least 3.5% forecasted by NRF, without accounting for a global health crisis. This growth was driven by an increase of around 22% in online sales to $969.4 billion.
NRF said the November-December holiday period in 2020 saw strong growth with retail sales increasing 8% to $787.1 billion. Holiday sales comprised 19.4% of overall annual retail sales. Online sales represented $206.9 billion of total holiday sales, reflecting a year-over-year growth of 22.6%.
The trade group forecasts real GDP growth of 4.5-5% in 2021 and also expects the economy to gain between 220,000 and 300,000 jobs per month during the year depending on the pace of the economy in the second and third quarters.
“The trajectory of the economy is predicated on the effectiveness of the vaccine and its distribution. Our principal assumption is that that the vaccination will be effective and permits accelerated growth during the mid-year. The economy is expected to see its fastest growth in over two decades.” – NRF Chief Economist Jack Kleinhenz
Mr. Kleinhenz added that factors such as savings, higher home prices, high stock valuations, more government support and low interest rates influence the economy and consumer spending behavior. He said that once things gradually normalize, people will turn to services, which normally account for 70% of consumer spending.