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According to the National Retail Federation’s (NRF) 2013 economic forecast, retail industry sales are projected to increase 3.4 percent, slightly less than the preliminary 4.2 percent growth of 2012. The subdued forecast comes on the heels of a holiday season that went head-to-head with Washington’s political wrangling over fiscal concerns, shifting consumers’ spending plans downward. In the end, holiday sales in 2012 increased 3.0 percent.

Shop.org, NRF’s digital division, expects online sales in 2013 to grow between 9 and 12 percent. Online sales in 2012 during the months of November and December increased 11.1 percent.

NRF’s 2013 forecast, released Jan. 28, include most traditional retail categories including grocery stores, specialty stores, discounters, department stores and exclude sales at automotive dealers, gas stations and restaurants.

“What we witnessed during the holiday season is an indication of what we are likely to see in 2013. Consumers read troubling economic headlines every day and look at their bottom lines at the end of the month, and they don’t like what they see,” said Matthew Shay, NRF president and CEO. “Pushing fiscal policy decisions down the road will lead to even greater uncertainty, and will continue to impact consumers’ desire and ability to spend on discretionary items.”

Savvy retailers will adapt. “Retailers will compensate for the drag on household spending this year by managing inventories and focusing on providing value for their shoppers through unique promotions in stores and online and exclusive product lines,” added Shay.

A number of factors contributed to NRF’s 2013 economic forecast, including:

• Employment: The labor market continues its modest recovery, but 2013 is not expected to result in meaningful acceleration in growth. As of December 2012, the unemployment rate has held steady for the last two months at 7.9 percent. Retailers on average employed 150,000 more workers in 2012, and the industry remains one of the biggest employers in the world.
• Income growth: Consumers are constrained by modest growth in income, and recent legislation passed in January increased payroll taxes for millions of workers, further limiting and Americans spending decisions.
• Housing: NRF expects the housing sector to continue to improve and the fundamentals for growth to see continued gains in 2013.
• Inflation: Price pressures continue to be contained. NRF expects the Consumer Price Index to increase 1.9 percent in 2013, below the 2.1 percent increase in 2012.
• Consumer confidence: Current consumer attitudes are likely weighed down because of the handling of the fiscal cliff and the increase in payroll taxes. NRF expects confidence to improve as the pace of the recovery accelerates in the second half of the year.

“While it’s too early to know the full effect of higher payroll taxes, there’s no question that many consumers will feel some kind of impact from the change in their paychecks,” said NRF chief economist Jack Kleinhenz. “…We expect those impacted to adjust to smaller budgets by trading down or simply cutting back on certain items.”

The Washington-based trade association represents retailers of all types in the United States and more than 45 countries.