By Barbara Thau
NEW YORK–Home furnishings revenues will trail already lukewarm retail sales growth of 3.5 percent in 2008, Rosalind Welles, chief economist for The National Retail Federation, said during a press reception at NRF’s 97th Annual Convention & Expo here.
Retail industry sales will increase 3.5 percent from last year, down from 4 percent in 2007, and “unfortunately, home [goods] will be the hardest-hit area. If consumers are not buying homes and not selling existing homes, [they’re buying] less in the way of home furnishings,” Welles said.
The 3.5 percent gain marks the slowest growth rate since 2002, Welles said.
High energy costs, the housing crisis, sluggish employment and income growth are conspiring to dampen consumer shopping, she said.
Retailers across distribution channels will feel the effects of the slowdown.
Mass merchants, for example, will be both hurt and helped by the sluggish economy.
“They’ll suffer from [their core, low-income consumers] spending less, and benefit from some trading down,” Welles told HFN.
Even luxury merchants and online retailers, which have fared better than the industry as a whole, will feel the pinch.
“Luxury retailers will continue to outperform, but even they will feel the impact of a slower economy,” she said.
Still, “it isn’t like we’re falling off a cliff,” Welles said. “We’re just going into a slowdown.”
And the macroeconomic picture will gradually get better in the third and fourth quarters. The NRF expects industry sales to rise 3.2 percent in the first half of 2008 followed by a 3.8 percent gain in the second half as economic conditions improve.
“Things will gradually improve as we feel the impact of lower interest rates and perhaps some kind of stimulus package,” Welles said.
These could come in the form of tax rebates for consumers or tax cuts for business investments, she said.