Even if most metrics point to a healthy U.S. economy, Americans aren’t really feeling it.
That’s the opinion of one of America’s most influential retailers, John Furner, president and chief executive officer of Walmart U.S., who also serves as chair of the board of directors of the National Retail Federation.
“We have the lowest unemployment rates in 60 years. Wage growth is outpacing the rate of inflation. Household net worth has increased since the pandemic,” said Furner. “There are a lot of objective indicators that the economy is in a really good place, but asking consumers about it, maybe their sentiments don’t match the reality.
“The nagging problem is the stubborn inflation. Food inflation has been high but moderating.”
Furner’s comments came Wednesday during his discussion on the state of retail and the consumer with Matt Shay, president and chief executive officer of the NRF, which is now projecting that 2024 retail sales will increase between 2.5 percent and 3.5 percent to between $5.23 trillion and $5.28 trillion.
“The resiliency of consumers continues to power the American economy, and we are confident there will be moderate but steady growth through the end of the year,” Shay said. “Successful retailers offer consumers products and services when, where and how they want to shop with prices they want to pay.”
The 2024 forecast compares with the 3.6 percent sales growth to $5.1 trillion last year, according to the NRF. The trade organization also pointed out that the 2024 forecast is “in line” with the 10-year pre-pandemic average annual sales growth of 3.6 percent.
The NRF also predicts that non-store and online sales, which are included in the total figure, should increase 7 to 9 percent, to between $1.47 trillion and $1.5 trillion, compared to $1.38 trillion last year. NRF’s retail sales numbers exclude automobile dealers, gasoline stations and restaurants to focus on what it considers core retail. NRF analyses use data from various U.S. government sources as well as the CNBC/NRF Retail Monitor, powered by Affinity Solutions.
Among those also participating in the presentation was Jack Kleinhenz, NRF’s chief economist, who said that GDP will grow around 2.3 percent this year, slowing somewhat from the 2.5 percent in 2023. Job growth will be sustained, he added, but there won’t be as much in 2024.
Kleinhenz, Shay and Furner concurred that consumers in the U.S. are resilient, and one reason is that wages have been growing recently. Last year, Walmart brought its average hourly U.S. wage to more than $17.50. Walmart’s previous minimum wage was $12 an hour.
“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,” Kleinhenz said. “The question for 2024 ultimately is, will consumer spending maintain its resilience?”
Kleinhenz said he expects about 100,000 fewer jobs on average per month compared with 2023 and the unemployment rate to average 4 percent in 2024.
Still, Kleinhenz also cited the “wealth effect” of rising home and stock prices seen in 2023 probably continuing in 2024.
Katherine Cullin, NRF’s vice president of industry and consumer insights, described the current state of consumer spending, saying, “Consumers continue to spend in January and February and are not afraid to splurge on special events.” Also, “spending on health and personal care surged in January and February.”
With general merchandise, “We are seeing some deflation,” Cullin said. But due to inflation, a lot of consumers are more choiceful, she said.
Furner emphasized that convenience in the shopping experience has become increasingly important. “People are willing to trade off for things that are more convenient — things that save time,” Furner said. “People are looking for more and more ways to spend time with families and experience things they didn’t experience before. The underlying trend of convenience I think is here to stay.”
Regarding the state of the supply chain, Furner said, “At Walmart we generally see things as much more stable than they have been for several years. We are proud of the diversification of some of the ways we procure and source goods.” Flexibility “is really important, to weather unexpected events. A whole series of things can be out of your control.”
Furner also emphasized the importance of combating organized retail crime, which is plaguing the industry. “Historically we talked about shrink, but there is a real human dimension that impacts everyone in the stores and drives up prices. It happens at the port of entry, online and not only in stores. This is an issue that affects communities, access to products, causes prices to rise, and can cause stores to close, and that affects employment, taxes and services in communities. We need to keep prices low despite improvements in the economy and wages growing.
“The industry, lawmakers, the Department of Homeland Security, we need to work together to solve this issue,” Furner said.
