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Economic Forecasts

Retail Starts 2018 Slowly but Will Pick Up

Kiplinger's latest forecast on retail sales and consumer spending


GDP 3.0% pace in '18, up from 2.3% in '17 More »
Jobs Big job gains will continue, but reflect a strong economy More »
Interest rates 10-year T-notes at 3.3% by end '18 More »
Inflation 2.6% in '18, up from 2.1% in '17 More »
Business spending Up 7% in '18, boosted by expanded tax breaks More »
Energy Crude trading from $55 to $60 per barrel in April More »
Housing Existing-home sales up 1.6%, new-home sales up 9.8% in '18 More »
Retail sales Growing 4.7% in '18 (excluding gas) More »
Trade deficit Widening 5%-6% in '18 More »

Retail and restaurant sales dipped slightly for the third straight month in February. Auto sales declined for the fourth month, coming off high demand after Hurricane Harvey forced the replacement of thousands of cars. Some delayed tax refunds may also have played a role in the lackluster February sales. Spending growth will likely return in March’s report, but analysts will look closely for any signs of consumer spending fatigue, despite high consumer optimism.

2018 should be a good year for retail. Sales, excluding gasoline and autos, will grow 4.7%, better than 2017’s 4.1% pace. Consumer wealth gains will lead to more home improvement projects and will keep sales of building materials humming, with 8.1% growth, compared with 8.2% in 2017. Sales of all other goods will advance 4.5% in 2018, a step up from 2017’s 3.8% and the best growth in seven years. E-commerce will have yet another banner year, growing 15%, while in-store sales should do all right at 3.0%, their best showing since 2014.

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Auto sales will rise only 2% after years of strong growth. The new tax law makes it easier for businesses to purchase motor vehicles, which will help the industry in a year that will see consumer demand ease.

Restaurant sales should rise 3.6% in 2018, a bit more than 2017’s 3.2%, as flush consumers typically eat out more when times are good. However, the restaurant boom of 2011-16 is likely over. Some chains will find expansion harder because of labor shortages, which will curtail sales increases. And higher minimum wages will boost menu prices.

SEE ALSO: 6 Retailers That Can Stand Up to Amazon

Source: Department of Energy, Price Statistics