California Apparel News

Despite rumblings of a trade war with China and an up-and-down stock market, the National Retail Federation said it expects retail sales for 2019 to be up from 3.8 percent to 4.4 percent, totaling more than $3.8 trillion.

Preliminary estimates show that 2018 was a solid year for retail sales, which grew 4.6 percent over the previous year to $3.68 trillion. That exceeded the NRF’s forecast of at least 4.5 percent growth for 2018.

Online sales in 2018 grew 10.4 percent to $682.8 billion, with online sales this year expected to shoot up between 10 percent and 12 percent.

“We believe the underlying state of the economy is sound,” said Matthew Shay, president and chief executive of the National Retail Federation, a retail trade group based in Washington, D.C. “More people are working, they’re making more money, their taxes are lower and their confidence remains high.”

Many experts expected retail sales to take a hit last year with the recent government shutdown and a shaky stock market.

Jack Kleinhenz, the NRF’s chief economist, said the good news is that inflation and interest rates are expected to remain low this year. “We are not seeing any deterioration in the financial health of the consumer,” he said. “Consumers are in better shape than at any time in the last few years. Most important for the year ahead will be the ongoing strength in the job market, which will support consumer income and spending, both key drivers of the economy.”

Job growth was robust in 2018 and should continue at a healthy pace this year. The NRF expects the overall economy to gain an average of 170,000 jobs a month, down from 220,000 in 2018. Unemployment, which currently is at 4 percent, will drop to 3.5 percent by the end of the year. Gross domestic product is likely to grow about 2.5 percent in 2019 over 2018.

One roadblock could be the rise in tariffs on Chinese goods imported into the United States. The NRF said tariffs could drive up the cost of consumer products and affect company profits this year. Right now, a 10 percent tariff has been placed on $200 billion in goods coming from China, including fabric, handbags and furs. That tariff could be pushed up to 25 percent on March 1.

Kleinhenz said it has been difficult to measure the impact of the recently ended government shutdown, which lasted for 35 days, from Dec. 22, 2018, to Jan. 25, 2019. Government workers will be paid retroactively, he said, but some spending on things such as dining and entertainment has been lost, and government contractors will not receive back pay.

A key issue will be how quickly the Internal Revenue Service can turn around its potential backlog of tax returns, which would affect first-quarter spending.