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Economic Forecasts

Consumers Are Upbeat

Kiplinger's latest forecast on retail sales and consumer spending


GDP 2.1% growth in ’17, following 1.6% in ’16 More »
Jobs Hiring pace should slow to 160K/month in '17 More »
Interest rates 10-year T-notes at 3% by end '17 More »
Inflation 2.5% in '17, up from 2.1% in '16 More »
Business spending Rising 3%-4% in ’17, after flat ’16 More »
Energy Crude oil trading from $55 to $60 per barrel in May More »
Housing Single-family starts up 10% in '17 More »
Retail sales Growing 4.2% in '17 (excluding gas) More »
Trade deficit Widening 4% in '17, after nearly flat '16 More »

Measures of consumer sentiment are all hitting highs not seen in a decade and should bolster the economy this year. Excluding gasoline, retail sales in 2017 are expected to rise by 4.2%, better than the 3.8% growth rate in 2016. A pickup in merchandise sales will more than balance out an expected slowing in the growth of motor vehicle sales and restaurant meals.

Strong retail sales growth in January and a decent February indicate that consumers are still bullish on the economy. January’s 0.9% monthly jump in core retail sales (which exclude autos, gasoline, building materials and food services, the volatile categories) and February’s 0.1% increase indicate positive momentum. And though spending on motor vehicles dropped in January and February, that modest decline came on the heels of a torrid December.

Electronics buying surged once again in February, and department store sales resumed their slide. Department stores had increased their share of the retail market in January, but that trend reversal was brief. Given the recent string of store closure announcements, it appears that this downward trend will continue.


Food service sales are expected to slow a little this year as a moderate increase in gasoline prices will leave a little less money in drivers’ pockets for impulse buys at convenience stores.

Higher gasoline prices will make it appear that total sales are surging at a 5% rate this year. But this will be deceptive because, while gas prices are likely to rise, the volume of gas sold will stay fairly flat.

The timing of any tax cuts is a wild card for retail sales. If Congress passes tax cuts early enough in the year, there could be a positive impact on spending in 2017. But that’s not likely.

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Source: Department of Energy, Price Statistics