Rising Consumer Income, Low Interest Rates Propel 2003 Economy; 2003 GAFS Sales Forecast To Rise 5.6 Percent Over 2002.

Business Editors

WASHINGTON--(BUSINESS WIRE)--Jan. 13, 2003

After a year of constant economic ups and downs, the National Retail Federation (NRF) released its forecast today, predicting that 2003 GAFS sales (general merchandise stores, apparel stores, furniture and home furnishings stores, electronics and appliances stores, and sporting goods, hobby, book and music stores) are estimated to increase 5.6 percent from last year.

According to its Retail Sales Outlook Report, NRF cites gains in consumer income and low interest rates as major contributors to growth in 2003.

"The economy has been going through a 'soft spot' in activity which will give way to accelerated growth this year," said NRF Chief Economist Rosalind Wells. "2003 will not be a year of exceptional strength, but rather of solid advance. GAFS sales trends will parallel overall economic activity and improve during the year."

Wells said that this year's economy will be characterized by both strengths and weaknesses. However, she said, "we see more positives emerging than negatives." Wells said that one particular strength is that consumers' income is rising. "By any measure of consumer income, people have money to spend," she said. Increased productivity and low interest rates are also positive factors in 2003.

Concerns in the outlook include weak labor markets and "geopolitical risks." Though higher productivity is considered a strength, companies have been hesitant to hire additional workers because they are able to raise their output with the same amount or fewer staff than before. Wells said that "geopolitical risks"--or, the uncertainty which surrounds the Iraq conflict and terrorism--is the largest obstacle to accelerated economic growth.

Although 2003 economic growth is expected to increase more than 2002, retailers will continue to face the same challenges. "Until the economy gets through this 'soft spot,' retailers will need to use their ingenuity to attract shoppers to their stores," she said. "Consumers will still feel compelled to seek out the best deal for their money."

GAFS sales rose an estimated 5.4 percent in 2002.

The National Retail Federation (NRF) is the world's largest retail trade association with membership that comprises all retail formats and channels of distribution including department, specialty, discount, catalog, Internet and independent stores. NRF members represent an industry that encompasses more than 1.4 million U.S. retail establishments employs more than 20 million people--about 1 in 5 American workers--and registered 2001 sales of $3.5 trillion. NRF's international members operate stores in more than 50 nations. In its role as the retail industry's umbrella group, NRF also represents 32 national and 50 state associations in the U.S. as well as 36 international associations representing retailers abroad.

For more information on NRF, visit www.nrf.com.