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NRF bets on back half sales acceleration

The National Retail Federation has joined the growing chorus of voices expecting a surge in consumer spending during the next five months to compensate for a weak start to the year.

That weak start prompted a major downward revision in NRF’s full year sales forecast on Wednesday as the trade group said it now expects sales to increase 3.6% versus an earlier forecast of 4.1% shared back in January. The change was necessitated by weaker than expected growth of 2.9% during the first half of the year due primarily to extreme weather conditions which caused extensive store closings by many retailers.

Whether retail sales achieve NRF’s new target hinges on an assumption that sales will accelerate during the coming months. NRF contends retail sales will grow at 3.9% during the back half of the year.

“No retailer was immune to the doldrums witnessed during the first quarter, and as a result, the year’s growth trajectory was impacted,” said NRF president and CEO Matthew Shay. “That said, there is plenty of evidence that the second half of the year will be better for the industry as consumers begin to feel more optimistic about their spending decisions. And though we maintain realistic expectations of retail sales growth in 2014, we are optimistic that the chances for a stronger economy still exist.”

NRF’s chief economist, Jack Kleinhenz suggested that severe weather and other factors that took a toll on retailers are behind the industry and the overall outlook has become favorable.

“A second look at our forecast shifted our expectations slightly, but it’s important to note that the outlook is positive. Sales are growing and we expect them to continue at a moderate pace,” Kleinhenz said.

Positives Kleinhenz cited for the industry going forward include the fact that employment has grown at its strongest pace since 2005, business and consumer confidence have edged higher, manufacturing activity has expanded and inflation pressures remain tame. Improvements in those areas contributed to NRF’s favorable expectations in the coming months.