NRF: Attendees show performance anxiety for 2019
While many retailers celebrated having recently turned in one of their strongest holiday seasons in recent memory, attendees at this week’s NRF Show in New York were decidedly less cheery about the industry’s prospects for 2019.
You might think that, after one of the longest periods of economic growth in the history of the U.S., most would see an inevitable, cyclical downturn as the biggest risk factor, but in dozens of conversations held at the show this week, tariffs on imports, primarily from China, were mentioned most often as the biggest threat in the year ahead. Retailers worry they will be forced to choose between passing on significant price increases to consumers or absorbing the associated cost hikes to the detriment of their bottom line performance.
Attendees placed responsibility for the negative economic effects of tariffs largely on the shoulders of President Trump and his administration. Even supporters of the president, some who blamed inaction on past administrations as increasing the need for the current aggressive stance with China, admitted that Mr. Trump’s plan is unlikely to do much to curb the theft of intellectual property from American companies by the Chinese.
The concern around the standoff between the U.S. and China was reflected in a sudden upturn in equity markets yesterday when stock prices began to rise on a report that Steve Mnuchin, U.S. treasury secretary, had proposed in internal discussions the idea of dropping tariffs against the Chinese while the parties negotiated longer-term trade reforms.
Many who spoke with RetailWire felt that the tariff war and the current shutdown of the federal government were self-inflicted wounds on the health of nation’s economy. Earlier this week, the Trump administration updated its assessment on the impact of the shutdown on the economy to include government contractors in addition to federal employees. The original estimate, which attributed a 0.1 hit to the nation’s gross domestic product (GDP) every other week, has been updated to the same percentage on a weekly basis. By the end of the month, that would mean half a percentage point taken out of the U.S. GDP.
While none we spoke to were prepared to forecast a recession, most said a downturn was likely within the next several years. Even those who expected moderate growth in 2019, said going up against strong comps from 2018 would make it unlikely that the same types of percentage gains would be achieved in the year ahead.
- U.S. Debates Lifting China Tariffs to Hasten Trade Deal, Calm Markets – The Wall Street Journal
- Trump administration doubles estimate of shutdown cost to economy from original forecast – CNBC
DISCUSSION QUESTIONS: What non-retail factors are likely to have the biggest impact on the retailing industry in 2019? How should retailers plan accordingly?