US retail sales will hit $7.334 trillion this year, according to our forecast, a growth of 3.3% YoY. “Where we’re headed is something of a new normal of slower growth,” said our analyst Zak Stambor on our “Behind the Numbers: Reimagining Retail” podcast.
“Consumers are still spending—for now,” said our analyst Sky Canaves. But “retailers are feeling very vulnerable to [economic] forces and trying to take protective measures.”
Inflation keeps up: Inflation growth is cooling month over month, rising by just 0.1% in March, according to the US Labor Department as cited by CNBC. But inflation remains high compared to a year ago, up 5% over March 2022.
“[Inflation] feels high, even though it is at its lowest point in a year, because many of us, including myself, just haven’t been through a high-inflationary environment in our lives,” said Stambor.
Grocery pains: Food and beverage sales will grow by 7.1% in the US this year, according to our forecast, but brands and retailers risk alienating consumers as prices rise. Much growth in this category has come from price elevation, as sales volumes remain the same or take a hit.
Private label play: Lower-priced groceries look particularly attractive when sharing a shelf with brand items that cost twice as much.
Gassed up: OPEC+ announced earlier this month it would cut oil output. “That’s going to raise gas prices and could really throw a wrench in consumer spending,” said Stambor, noting that high gas prices will cause a pullback in other areas.
Looking ahead: Retail sales growth will remain between 3.3% and 3.5% per year through the end of our forecast period in 2027, a significant decline from 8.1% growth last year and 17.9% in 2021. In the more immediate future, keep an eye on jobs.
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