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Economic Forecasts

The Consumer Is Looking Better

Kiplinger's latest forecast on retail sales and consumer spending

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GDP 2.1% pace in '17, 2.4% in '18 More »
Jobs Hiring pace should slow to 175K/month by end '17 More »
Interest rates 10-year T-notes at 2.4% by end '17 More »
Inflation 1.4% in '17, down from 2.1% in '16 More »
Business spending Rising 3%-4% in '17, after flat '16 More »
Energy Crude trading from $40 to $45 per barrel in December More »
Housing Existing-home sales up 3.5% in '17 More »
Retail sales Growing 3.5% in '17 (excluding gas) More »
Trade deficit Widening 4% in '17, after nearly flat '16 More »

Retail sales for the year suddenly look better after a strong gain in July and upward revisions to May and June. Sales excluding gasoline in 2017 are likely to rise by 4.0%, up a bit from its 3.8% pace in 2016. And given very modest price growth, inflation-adjusted sales are actually doing pretty well, which is a good sign for GDP growth in the second half of the year.

An encouraging sign is that July was a good month for in-store sales after weakness in May and June. Department store sales have surprisingly managed to stay steady for the past nine months, marking the first time that the relentless eleven-year downtrend has been arrested. Although the respite is only temporary, a slowdown in the otherwise ceaseless decline would relieve some of the pressure on this sector to speed up store closures.

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E-commerce sales will grow 14% this year, slightly less than the 15% gain in 2016. E-commerce has shown remarkably solid growth over the past seven years, and will account for 9% of all retail sales (13% of all goods sales) by the end of this year. In-store sales will show only modest 1.8% growth, though this is a slight pickup from last year’s 1.4% gain.

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Building materials sales appear to be back on track after a puzzling slowdown earlier this year. They should have a strong year, mirroring the strength in housing construction in general. They are expected to grow 7.3% in 2017, up from 5.8% in 2016.

Restaurant sales are slowing to a more sustainable growth pace this year: 3.3%, down from 5.5% in 2016. Labor shortages will make expansion difficult for some chains, and higher minimum wage laws will boost menu prices. Plus, sales grew strongly for six years straight and are due for a breather.

SEE ALSO: 6 Retailers That Can Stand Up to Amazon

Source: Department of Energy, Price Statistics