Retail sales growth forecast to slow in 2007

U.S. retail sales growth will shrink to 4.8% in 2007, the smallest gain in five years, hurt by the slowing economy, the National Retail Federation said Tuesday.

Sales will be subdued in the first six months of the year but will accelerate in the second half, the Washington-based trade group predicted. It said revenue at retailers of clothes, home furnishings, books, electronics and other general merchandise rose 6.3% in 2006.

Consumer spending began decelerating in the last six months of 2006, challenged by the weaker housing market, higher fuel prices and lackluster employment growth, the group said. Home improvement retailers and other stores that rely on housing sales will be hurt by the slowdown, it said. The forecast gain would be the smallest since sales increased 3.9% in 2003.

“This year, slow economic growth will be reflected in moderate consumer spending and retail sales gains,” said the trade group’s chief economist, Rosalind Wells. “The quarterly industry sales pattern will be the opposite of last year, with modest gains early in the year and better increases in the second half.”

The retail federation said growth in 2006, which beat its forecast of 4.7%, was stronger than expected because of robust consumer spending in the first half of the year.

Sales increases at building material and garden equipment stores experienced a sharp deceleration in 2006, from a 20% increase at the beginning of the year to a 4.3% decline at the end, the trade group said. Furniture store sales went from an 8% jump in the first quarter to a 2.5% gain toward year-end.

The group predicted that 2007 sales, excluding those for autos and gasoline and at restaurants, would rise 3.8% in the first quarter, 4.6% in the second, 5.2% in the third and 5.7% in the final three months. Luxury retailers will continue to outperform other segments, and online shopping will expand, it said.