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Economic Forecasts

Consumers Rev Up Spending

GDP 1.4% growth for the year; a 2% pace in '17 More »
Jobs Hiring slowing to 150,000/month by end '16 More »
Interest rates 10-year T-notes at 1.4% by end '16 More »
Inflation 1.8% for '16, up from 2.4% in '17 More »
Business spending Flat in '16, after drop in '15 More »
Energy Crude oil trading from $40 to $45 per barrel in Sept. More »
Housing Prices up 5% on average in major metro areas More »
Retail sales 4% growth in '16, compared with 4.8% in '15 (excluding gas) More »
Trade deficit Widening 4% in '16, after a 6.2% increase in '15 More »

Feeling more confident about the economy, the job market and their own financial stability, shoppers dialed up spending in June. The third consecutive month of gains marks a strong end to the second quarter of 2016, though challenges remain as retailers grapple with changing industry trends—more online shopping, free shipping demands, etc.

See Also: All Our Economic Outlooks

Healthy consumer spending has retailers on solid footing going into the second half of the year and the all-important year-end holiday shopping season, barring any big political or economic shocks. Leading the charge: Online retailers. For 2017, we expect the steady pace of retail sales growth to continue, with total sales gains on a par with this year’s 4% clip.

Retail and food service sales surged 0.6% in June compared with the month before, and the industry overall posted a solid 2.7% rise in revenue compared with the same period in 2015. Nonstore retailers emerged the clear winners as more and more consumers turned online to shop. Online retailers, including online marketplaces such as Amazon and Etsy, plus retailers with e-commerce sites—Walmart, Target and others—posted a whopping 14.2% gain over the same month a year ago. Expect a spike in July’s numbers as well, thanks to Amazon’s second successful Prime Day and the countless other retailers vying for clicks with online discounts.


But online sellers weren’t the only retailers busy ringing up sales in June. Health and beauty supplies continue to be a bright spot for the industry, with receipts up 8.4% from last year. Moreover, a more robust housing market is boosting sales for sellers of building materials and garden supplies. Residential construction remains steady; we expect construction of single-family units to increase 14% from last year. New housing developments, along with eager home sellers prepping existing homes to go on the market, spell welcome news for home and garden suppliers.

June wasn’t rosy for all retailers. Electronics sellers struggled to post gains. Sales were flat compared with May, and revenues were down 4.7% versus June 2015. New products will help. Revenue from wearable technologies such as computer-enabled watches and rings, plus emerging technology such as smart home devices and drones, will help nudge up consumer electronics sales by 1.2% this year versus last year, according to the Consumer Technology Association. Heading into 2017, more shoppers will also shell out for ultra-high-definition televisions, virtual reality headsets and 3-D printers.

Meanwhile, department store woes continue as they struggle to draw people into their stores while also drawing more folks to shop electronically via improved mobile sites and apps.

SEE ALSO: Why I Love Investing in Cult Retailers

Source: Department of Energy, Price Statistics

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