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Don’t expect 2014 to be much better for retail sales, trade group warns

Correction: An earlier version of this story stated that consumer spending makes up about one-third of the U.S. economy. It makes up about two-thirds.

Economic headwinds could influence how shoppers spend their money this year, a retail group says. Wal-Mart and Target have already lowered their earnings estimates for the next quarter. (Steven Senne/AP)

After a weak holiday season and rough winter weather that kept shoppers away in January, retailers were dealt another dose of sobering news Thursday.

The nation’s biggest retail group issued a modest growth forecast for sales in 2014, and warned of economic headwinds that could influence how shoppers spend their money this year.

“Debt ceiling debates, increased health care costs, and regulatory concerns still pose risks for both consumers and retailers,” Matthew Shay, president of the National Retail Federation, said in a statement.

Last year was rough for retailers, and the economic signals headed into this year were mixed. December’s jobs report was unusually bad, but the country’s growth rate was strong. The Federal Reserve pushed ahead with the decision to taper its stimulus program, which will likely drive interest rates higher. At the same time, millions of unemployed Americans lost access to jobless benefits at the end of the year, eating into their budgets.

That’s a significant impact on a country where consumer spending still makes up two-thirds of the economy.

The federation predicts that retail sales will grow by 4.1 percent this year, marginally higher than last year’s figure of 3.7 percent. The group said online sales would increase by 9 to 12 percent compared with last year. Online sales during the holiday season grew by 9.3 percent, much lower than the federation’s estimate of 15 percent. They were widely considered a bright spot in the busiest sales season of the year, especially as brick-and-mortar businesses struggled to lure customers into stores.

A mix of aggressive discounts, budget-conscious consumers and a shorter-than-usual holiday season kept sales low, analysts say. Major retailers reported anemic sales over the holidays and Wal-Mart and Target have already lowered their earnings estimates for the next quarter. On Thursday, department store Kohl’s reported a drop in fourth-quarter sales and lowered its profit estimate, citing poor customer traffic.

Amrita Jayakumar covers national startups, small business issues and entrepreneurship.
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