(Reuters) -Retail sales in the United States are expected to grow at a slower pace this year, the National Retail Federation (NRF) said on Wednesday, as fears of a recession and tremors in the banking industry cast a shadow over a recovery in consumer spending.
The trade body said it expects retail sales to rise between 4% and 6% to up to $5.23 trillion, in comparison to 7% growth in 2022 to $4.9 trillion.
The forecast comes even as NRF noted consumer spending held up fairly well in the first quarter of the year, thanks to a strong labor market, wage growth and savings built over the pandemic
Americans are sitting on about a trillion dollars in excess savings -- as higher-income households delayed big-ticket purchases in the face of inflation -- and are likely to continue to spend on goods and services in a reopening economy, NRF CEO Matthew Shay said, but added that sales would still be moderate.
Last year, the retail industry took a beating due to stubbornly high inflation and dwindling discretionary budgets at American households that left companies ranging from Walmart (NYSE:WMT) Inc to Macy's Inc (NYSE:M) with excess inventories.
While inflation is showing signs of cooling, NRF projected it will remain between 3% and 3.5% for all goods and services for the year.
"It's kind of a surprise that we've had some strength (in retail sales) in the first couple of months. But it's also too early to know the lagged effect of interest rate (hikes) and... the banking sector turmoil," NRF Chief Economist Jack Kleinhenz said on a press call.
The global banking sector is staring at the biggest crisis since 2008 following the collapse of two U.S. lenders and the rescue takeover of Credit Suisse, which ratcheted up fears of a contagion.