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Economic Forecasts

Consumers Are Spending More

GDP 1.8% growth for the year, down from 2.4% in '15 More »
Jobs Hiring slowing to 150,000/month by end '16 More »
Interest rates 10-year T-notes at 1.8% by end '16 More »
Inflation 2.1% 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 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 »

A second consecutive month of robust retail sales gains points to a healthy American consumer, cautiously optimistic about the economy and job prospects, and ready to spend. Retail and food services sales grew a solid 0.5% in May, after surging 1.3% in April compared with the previous month. Strength in the housing market, continued declines in unemployment and upticks in wages will spur shoppers in coming months, helping to boost U.S. economic activity.

See Also: All Our Economic Outlooks

Retail sales, excluding gasoline, will grow at about a 4% clip for the year, trailing last year’s 4.8% gain — in large part because of the slowdown in car sales, which boomed in 2015.

Core sales, which include general merchandise, groceries, prescription drugs and e-commerce but exclude automobiles, gasoline, building materials and food services, rose 0.4% in May after climbing 0.9% in April. The boost in the core number suggests strength in overall consumer spending, which accounts for two-thirds of U.S. economic output.


Nine out of 13 categories tracked by the U.S. Census Bureau posted gains in May. Shoppers shelled out more on clothes, cars, electronics and dining out. A 2.1% boost in sales at gasoline stations largely reflects a rise in fuel prices.

Nonstore retailers led the pack in sales growth. The category, which includes online sellers such as Amazon, saw sales spike 12.2% versus last year. In an effort to compete, brick-and-mortar stores are beefing up their online shopping presence by investing heavily in mobile sites, streamlining supply chain logistics and buying up warehouse space.

Department stores continue to flail. This segment saw receipts fall 5.8% in May, compared with May 2015, and the downward trend shows little hope of reversing anytime soon. A number of household names hope to blunt the bleeding by shuttering unprofitable locations. This year, Macy’s is closing 40 stores, Kohl’s is abandoning 18, and Sears is shutting down 10 plus 68 Kmart locations. J.C. Penney, on the other hand, has closed only 7 stores, with no plans to shutter more. The company is focused on restructuring its stores to double as pick-up centers for online shoppers and plans to be ready to fulfill same-day orders in time for back-to-school sales at all of its locations.

SEE ALSO: Why I Love Investing in Cult Retailers

Source: Department of Energy, Price Statistics

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