US retail sales are set to grow at a slower pace this year amid heavy inflation, rising unemployment and a challenging banking industry, the National Retail Federation (NRF) forecast.

The organization expects total sales to rise 4% to 6% to between $5.13 trillion and $5.23 trillion for the year, while online purchases are predicted to climb 10% to 12% year on year to reach $1.41 trillion to $1.43 trillion, the NRF said last week.

“Although the labor market has remained resilient, the trade organization anticipates job growth to decelerate in the coming months in lockstep with slower economic activity and the prospect of restrictive credit conditions,” the NRF explained. “The unemployment rate is likely to exceed 4% before next year.”

Fears of a recession and the financial crisis are also expected to play a role in consumer spending.

“While it is still too early to know the full effects of the banking industry turmoil, consumer spending is looking quite good for the first quarter of 2023,” said NRF chief economist Jack Kleinhenz. “While we expect consumers to maintain spending, a softer and likely uneven pace is projected for the balance of the year.”

In 2022, sales increased 7% as people continued to spend on material goods amid restrictions on travel and the distribution of stimulus checks from the US government. That followed 2021’s 14% jump, which was the highest growth rate in over 20 years. However, the 2023 forecast is above the pre-pandemic average gain of 3.6%, according to the NRF. “In just the last three years, the retail industry has experienced growth that would normally take almost a decade by pre-pandemic standards,” added NRF CEO Matthew Shay. “While we expect growth to moderate in the year ahead, it will remain positive as retail sales stabilize to more historical levels.”