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Economic Forecasts

2016 Holiday Sales to Top Last Year's

Kiplinger's latest forecast on retail sales and consumer spending


GDP 1.4% growth for the year; a 2% pace in '17 More »
Jobs Hiring at 150K-200K/month through '16 More »
Interest rates 10-year T-notes at 1.9% by end '17 More »
Inflation 1.8% for '16, 2.4% in '17 More »
Business spending Flat in '16, slight gain in '17 More »
Energy Crude oil trading from $40 to $45 per barrel in Dec. More »
Housing Prices up 5% in '16, 6% in '17 nationally More »
Retail sales Growing 3.4% in '16 and '17 (excluding gas) More »
Trade deficit Widening 4% in '16 More »

Retail sales bounced back in September, a positive end to a lackluster third quarter. Consumer spending, bolstered by moderate wage gains and a strengthening housing market, will continue to slowly but steadily propel economic growth throughout this year and next. We see retail and food services sales (excluding gasoline, which weathers significant price fluctuations) rising 3.4% in 2017, similar to growth this year.

Mixed sales reports so far in 2016 point to a more optimistic but still cautious consumer. Retailers are in a for a slightly better holiday season compared with 2015 but shouldn’t expect consumers to spend too freely. And while shoppers will shell out more this year, price reductions and promotions will keep a lid on sales growth. Look for apparel and general merchandise stores to offer some of the steepest discounts.

See Also: All Our Economic Outlooks

Decent holiday sales and a tightening labor market will help spur momentum for retailers, restaurants, grocers and the like in 2017. However, consumers cannot support the economy alone for long and will need help driving growth. Modest wage gains, an improving housing market and better access to credit will support increased sales in the coming year, but a hike in interest rates could cause consumers to rein in spending. While the economy is poised to brighten, some dark clouds loom on the horizon, especially continued low productivity growth, according to Scott Hoyt, an analyst with Moody’s.


Retail sales perked up a decent 0.6% in September, compared with August. However, the growth is less impressive after stripping away automobile sales and volatile gasoline prices. Factoring them out leaves a somewhat tepid 0.3% rise in sales. Plus, core sales, a key indicator of the underlying financial health of the consumer, ticked up a mere 0.1%, following two months of declines. This core measure (which excludes autos, gasoline, building materials and restaurant sales) corresponds most closely with the consumer spending component of GDP.

Car dealerships and gas station owners posted solid gains in September, as did sellers of building materials, garden supplies, sporting goods and furniture. Compared with last year, nonstore retailers (which include online sellers) clocked in double-digit growth. While consumers ate out and shopped online more in September, they pulled back spending in other areas. Health and beauty stores, as well as electronics and appliance merchants, saw sales dip, and department store receipts continued to plummet.

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Source: Department of Energy, Price Statistics