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Economic Forecasts


Summer Spending Dip Not Likely to Last

GDP 1.4% growth for the year; a 2% pace in '17 More »
Jobs Hiring slowing to 150K-200K/month by end '16 More »
Interest rates 10-year T-notes at 1.4% by end '16 More »
Inflation 1.5% for '16, 2.5% in '17 More »
Business spending Flat in '16, slight gain in '17 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 »

Consumer spending, the driving force behind U.S. economic growth, will pick up again later this year, lifted by back-to-school spending and the holidays, and will continue well into next year. We expect retail and food services sales (excluding gasoline) to grow 4% in 2017, on par with this year’s clip.

See Also: All Our Economic Outlooks

A pullback in consumer spending in July is worth noting, but it came after three months of solid gains and won’t derail shoppers’ momentum in coming months. July, a big month for vacations, is often a slower sales period.

Shoppers spent more at car dealerships and online, but held off on many other purchases. Retail and food services sales remained flat versus the month before, and rose 2.3% from the same period last year. Core retail sales — which exclude automobiles, gas, building materials and food services — were flat compared with June, with shoppers dialing back spending at restaurants, grocery stores and clothing stores, plus on building materials and garden equipment.

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Soaring growth in online sales highlights shifts in consumer shopping habits, as more folks turn to laptops and smartphones to make purchases and retailers beef up their online presence. Sales at nonstore retailers such as Amazon, Etsy and Quirky jumped 14.1% over the same period last year.

Department stores, on the other hand, saw sales continue to sink, down 4% compared with July 2015. The report came one day after Macy’s announced it will shutter 100 underperforming stores. Look for the move to give cover for other struggling department stores to do the same. The store model that anchored malls across the country for decades is no longer capable of meeting the evolving demands of the modern, connected consumer.

However, store owners are fighting back. Consumers still do the majority of their shopping in brick-and-mortar locations, and retailers across the board are testing ways to improve the store experience in tandem with offering better service online. The challenge is twofold: first, making the in-store experience as easy as possible (including ensuring shoppers don’t have to hunt down items or sales associates). Also, trying to make the process more entertaining by offering experiences consumers can’t get online — product testing, classes and workshops, live music and the like.

SEE ALSO: Why I Love Investing in Cult Retailers

Source: Department of Energy, Price Statistics

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