US retail sales to increase between 2.5% and 3.5% in 2024, trade group forecasts

FILE - Shoppers and sightseers walk along 5th Avenue, Dec. 11, 2023, in New York. The National Retail Federation said Wednesday, March 20, 2024, that retail sales will increase anywhere between 2.5% and 3.5% this year, a solid but still slower pace than the 3.6% seen last year. (AP Photo/Yuki Iwamura, File)

NEW YORK (AP) — The largest U.S. retail trade group is forecasting that the country's retail sales will increase anywhere between 2.5% and 3.5% this year, a solid but still slower pace than the 3.6% seen last year.

The National Retail Federation said Wednesday that it expects retail sales will reach between $5.23 trillion and $5.28 trillion this year.

The 2024 forecast is roughly in line with the 10-year pre-pandemic average annual sales growth of 3.6%.

"The economy is primarily supported by consumers who have shown much greater resilience than expected, and it’s hard to be bearish on the consumer,” the federation's chief economist, Jack Kleinhenz, said. “The question for 2024 ultimately is, will consumer spending maintain its resilience?”

The group’s calculation of retail sales excludes automobile dealers, gasoline stations and restaurants to focus on the core retail sector. The 2024 retail sales forecast is based on economic modeling that considers a variety of indicators including employment, wages, consumer confidence, disposable income, consumer credit, previous retail sales and weather.

A strong jobs market and rising wages have fueled household spending, but retail sales have become choppy in the face of rising credit costs and still higher prices. And shoppers have been shifting their spending to services after focusing on buying goods while they were staying close to home during the heart of the pandemic.

The retail group's forecast comes as Americans picked up their spending a bit in February after pulling back the previous month, according to the latest Commerce Department report. But last month’s gain of 0.6% was weaker than expected, and January’s decline was revised even lower, suggesting that many are growing more cautious with their money.

Many retailers are stepping up deals heading into the spring selling season, while offering new loyalty programs —both free and fee-based to get shoppers to return more frequently.

For example, in the world of home improvement, customers have been pulling back on big do-it-yourself projects amid a still challenging home market. Lowe's, the nation's second largest retailer, launched in January a free loyalty program that features such perks as free shipping and early notification of discounts.

It's similar to Lowe's separate loyalty plan for its so-called professional customers who include contractors.