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Economic Forecasts


Second-Half 2016 to See Stronger Retail Sales

GDP 2% growth for the year, down from 2.4% in '15 More »
Jobs 195,000 new hires a month through '16 More »
Interest rates 10-year T-notes at 2.1% by end '16 More »
Inflation 2.4% for '16, up from 0.7% in '15 More »
Business spending 4% gain in '16, after drop in '15 More »
Energy Crude oil trading at $40-$45/bbl. by July 4 More »
Housing Construction of single-family homes up 15% this year More »
Retail sales 4.2% growth in '16, from 4.7% in '15 (excluding gasoline sales) More »
Trade deficit Widening 4% in '16, after a 6.2% increase in '15 More »

Healthy retail sales growth in April promises to be a foretaste of stronger consumer spending after the slow start to the year. For retailers of all stripes, who saw April sales rise 1.3% from the month before, the prospect of better days ahead comes as welcome relief. Though consumers won’t throw caution to the winds, we expect they will open their wallets a bit more, especially in the second half of the year as the sluggish economy shows more life.

See Also: All Our Economic Outlooks

Retail sales, excluding gasoline sales, will expand at a 4.2% clip for the year. That’s slower than last year’s 4.7% gain, largely because the torrid pace of car sales will cool in a saturated market.

Look for shoppers to shell out more for apparel and other goods, plus lawn care and a variety of other services in coming months. Spending on furniture and home decor, recreational items, health care products and beauty supplies, in particular, will see stronger growth. An end to cool, rainy and stormy weather in many parts of the country so far this spring is also sure to unleash pent-up demand for sandals, swimsuits and other warm-weather clothing.

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Online sales are climbing at a double-digit pace and show little indication of slowing. Online sales and, to a much smaller extent, mail-order sales account for 10% of all goods sold in April, up from 8.7% in April 2015. That’s sure to grow further at the expense of sales in brick-and-mortar establishments. Amazon’s recent full-fledged jump into selling fashion online, for example, will have a big impact.

Department store earnings will likely continue to spiral down, following dismal numbers in the first quarter and despite a 0.3% boost in sales in April, compared with the month before. But sales were down 1.7% when compared with April 2015. Department stores continue to be plagued by a lack of ingenuity. They’re also struggling to put all of their inventory online and to better tailor their assortments to the differing needs and tastes of people in different regions of the country. Some also grapple with how to streamline inventory management systems, invest in improving their sales forces and offer more entertainment in stores to engage consumers.

For department stores, which used to be a mainstay in American consumer culture, with command over the majority of apparel sales, it has come down to survival of the fittest — and the most adaptable. Those able to bend under the pressures of the Digital Age will survive; others will be forced to shutter more, if not all, of their doors.

SEE ALSO: Why I Love Investing in Cult Retailers

Source: Department of Energy, Price Statistics

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