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Economic Forecasts

Retail Sales Growth Slows a Bit

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 1.3% 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 September More »
Housing 5.5% price growth by end of '17 More »
Retail sales Growing 3.5% in '17 (excluding gas) More »
Trade deficit Widening 4% in '17, after nearly flat '16 More »

Sales continued to struggle in June. Part of the reason is slower price growth, especially for food and energy, but part was also weakness in real consumer spending. Even e-commerce sales slowed. E-commerce growth is expected to pick up again, but other retail spending is likely to remain subdued for a time.

Growth in sales excluding gasoline is likely to rise by 3.5% in 2017, falling below its 3.8% pace in 2016. Strong sales in e-commerce and building materials will not be enough to compensate for the slowdown of motor-vehicle and restaurant sales. Auto sales peaked in December, while restaurant receipts appear to have plateaued this spring.

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E-commerce continues to gobble up the retail gains; it will grow 13% this year, slightly less than the 15% gain in 2016. The flip side of strong e-commerce gains is that in-store sales will pick up only gradually, at about a 1.5% rate. But a key factor for that slow gain is that department store sales are sliding again, possibly linked to store closures announced by various chains.

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Building materials are having a strong year, mirroring the strength in housing construction in general. They are expected to grow 6.3% in 2017, following a similar performance in 2016.

Food-service sales are slowing to a more sustainable growth pace this year: 2.6%, 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 had been growing 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