The U.S. retail industry is expected to grow over the next year, with consumers remaining cautious, according to a report by Moody's Investors Service. Retail sales are expected to rise about 3 percent to 4 percent in total for 2014 and 4 percent to 5 percent in 2015.
"We expect U.S. retail sales to increase modestly this year, with a moderate pick-up in 2015 as GDP growth accelerates," said VP and senior analyst, Mickey Chadha. "That said, economic fundamentals remain mixed and lower-end consumers are still not sharing equally in the U.S. economic recovery, so it's difficult to see what will drive overall consumer spending higher."
Historically retail outperforms the GDP growth, and this will continue to be the case as incomes remain depressed, underemployment continues and wage growth is slow. The reports also expect retail operating income growth to be in the same 4 percent to 5 percent range.
According to the National Retail Federation, sales grew 2.9 percent in the first half of 2014 but are expected to improve at least 3.9 percent in the second half.
The report is not expecting too many inspirational product launches this holiday season, aside from the iPhone 6, iPhone 6 Plus and the iPad. Therefore, sales are not expected to grow much beyond 4 percent in the final quarter. According to Deloitte's annual retail holiday sales forecast, total holiday sales are expected to reach between $981 billion and $986 billion, a 4 percent to 4.5 percent increase over last season.
In specific retail sectors, Moody's predicts that home improvement, drug stores and auto dealers will boost growth of the overall industry sales. Apparel and footwear stores will also do well next year, yet discounters and warehouse clubs will only slightly improve, continuing to underperform.
Some of the fastest growers in the retail sector include Home Depot (NYSE:HD), Dollar General (NYSE:DG), Best Buy and CVS.
-See this Moody's press release
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