Although shorter-lived than many had projected, the war with Iraq has prompted the National Retail Federation (NRF) to revise its 2003 forecast for sales downward. According to its April Retail Sales Outlook report, NRF has revised the 2003 sales forecast from 5.6 percent growth in 2003 to 3.8 percent growth.
NRF Chief Economist Rosalind Wells points out that geopolitical uncertainty—including a war with Iraq—affects retail projections. "The Iraqi conflict is hindering decisions made by both businesses and consumers," Wells says. "Not only are businesses taking a wait-and-see approach before making major financial commitments, but they also are reluctant to conduct business as usual, holding back hiring and causing layoffs of others."
In addition, consumers have been affected by the escalating price of crude oil. "Consumers have had to dig deeper into their pocketbooks to pay home heating bills and run their cars," Wells says. "As a result, disposable income has decreased and retail sales have suffered."
However, Wells believes, consumer spending should significantly improve once the Iraq conflict is fully resolved, likely by the second half of the year. "With a positive war outcome, consumer confidence should increase. Employment and income gains will increase. Oil prices will subside. The stock market will probably reflect better times ahead. And a return to more robust consumer spending should follow," Wells says.
NRF projects first-quarter GAFS sales (sales reported by stores selling general merchandise, apparel, furniture and sporting goods) to increase slightly more than 2.0 percent. Second-quarter sales are forecast to increase 2.5 percent, third-quarter sales are projected to show a 4.7-percent increase and fourth-quarter sales are expected to increase 5.3 percent.