Happy Days? Retail Forecast Predicts Upswing

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After enduring well over a year's worth of brutal sales results, two leading retail organizations are forecasting a much happier 2010, with overall sales predicted to rise by at least 2.5%.

The first comes from the National Retail Federation, the Washington D.C.-based trade group, which thinks more jobs and a healthier housing market will spur a gain of 2.5% in retail sales, as compared to a total decline of 2.5% last year. And Retail Forward -- a Kantar Retail Company based in Columbus, Ohio -- is somewhat more optimistic, anticipating a gain of 1.5% to 2.0% in the first half of the year, advancing to 3% to 4% in the second half, for a total gain of somewhere between 2.5% and 3% for the year.

Of course, there are plenty of caveats, Retail Forward economist Frank Badillo tells Marketing Daily. "Renewed job and income growth will ultimately outweigh other drags on the recovery, such as tighter credit availability and new credit regulation," he says. "And we've seen some real improvement in consumer confidence levels since the lows of last March. But if confidence and the overall mood of the country were to turn more negative, that could threaten the outlook."

The channels that performed best during the holiday period will continue to do well, including non-store and online; food, drug and mass, and soft goods. Still, even those forecasts are somewhat tempered. Since much of the fourth-quarter gain in online spending was driven by products like e-book Readers, that demand may prove to be a blip. "If some of that demand proves to be a one-time surge, then non-store sales growth will subside into single digits early in 2010 and further ease later in the year."

Food, drug and mass channels are forecast to register 2.5% growth in the first half of the year, and 4% in the second half.

"As we continue to see signs of improvement throughout the U.S. economy in 2010, overall sentiment will begin to lift, making way for slight increases in consumer spending," NRF Chief Economist Rosalind Wells says in a statement. "While we still expect shoppers to continue to be frugal with their discretionary spending, retailers will soon be able to reap the benefits of leaner, smarter inventories and a year and a half of pent up consumer demand."

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