In the face of sluggish global growth and uncertainty over the presidential election, the retail industry's trade organization sees signs that the positive trends influencing consumer spending are outmuscling the negative.
As such, the National Retail Federation on Tuesday raised its full-year sales forecast to 3.4 percent growth, up slightly from its previous expectation for a 3.1 percent lift. It cited improvements in the housing market, job growth and higher wages as three factors that should boost consumer sentiment through the end of the year.
A larger-than-expected lift in online sales is likewise expected to drive additional growth, with the NRF now calling for a 7 to 10 percent increase in digital revenue. That compares with its prior forecast for a 6 to 9 percent lift.
"Economic indicators are showing positive trends for retail," NRF President and CEO Matthew Shay said in a news release. "Challenges remain, with some greater than others depending on the retail category, but consumer confidence remains high."
Indeed, as sales at online retailers continue to thrive — revenue at nonstore retailers rose 14.2 in June — the department store channel has remained challenged. Department store sales contracted 3.7 percent last month compared with the prior year.
In addition to uncertainties about the global economy and the domestic political landscape, a stronger U.S. dollar also threatens to hold back retail sales, NRF said.
Retailers have likewise been grappling with a shift in consumer spending, as Americans favor dining out and attending boutique fitness classes over spending on traditional goods. Adding to the industry's challenges are a proliferation of discounts, which make it tougher for retailers to record year-over-year sales increases.
Yet according to the NRF's data, which excludes sales of automobiles, gasoline stations and restaurants, retail sales rose roughly 4 percent during the first six months of 2016. Easy comparisons in the second half, which follow last year's unseasonably warm winter, should give retailers a push through the end of 2016, the organization said.
"There are many factors that could prove to be hurdles but our overall outlook is optimistic," said Jack Kleinhenz, NRF's chief economist.
The group's raised outlook comes less than a week after it released its back-to-school survey results, which said the average household with children in kindergarten through high school plans to spend $673.57 this year. That would represent a 7 percent lift compared with 2015.
While the NRF said the survey is yet another indication that shoppers are feeling more confident, because many back-to-school purchases are needs based, they don't directly correlate with overall spending trends.
The organization's rosier full-year sales prediction matches last year's results, when retail sales as calculated by the NRF rose 3.4 percent. It had originally called for growth of 4.1 percent that year, but later revised its forecast down to a 3.5 percent increase.