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Economic Forecasts

Consumer Spending Still at High Level

Kiplinger’s latest forecast on retail sales and consumer spending

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GDP 2.9% pace in ’18, up from 2.2% in ’17 More »
Jobs Unemployment rate will decline further More »
Interest rates 10-year T-notes at 3.2% by end ’18 More »
Inflation 2.5% 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 $65 to $70 per barrel in December More »
Housing Price growth: 5.0% by end of ’18 More »
Retail sales Growing 5.1% in ’18 (excluding gas and autos) More »
Trade deficit Widening 5%-6% in ’18 More »

Total retail and food service sales edged up a modest 0.1% in September, likely slowed by Hurricane Florence. Restaurant sales dropped, possibly a result of widespread flooding in the Carolinas. These are likely to bounce back in October. Flooding was likely a boon for new car sales, however, as they climbed more than they have in six months. We expect consumers to carry on as their smaller tax bills have boosted their willingness to splurge and is keeping confidence high.

2018 will go down as a good year for retail. Sales, excluding gasoline and autos, will grow 5.1%, better than 2017’s 4.2% pace. Building materials’ sales are advancing at a more sustainable 3.2% rate compared with a hot 8.2% in 2017. Sales of all other goods will increase 4.9% in 2018, a step up from 2017’s 3.9% and the best gain in seven years. E-commerce will have yet another banner year, growing by 15%, while in-store sales should do all right at 3.6%, their best showing since 2014.

2018 will go down as a good year for retail. Sales, excluding gasoline and autos, will grow 5.2%, better than 2017’s 4.2% pace. Building materials’ sales are advancing at a more sustainable 3.6% rate compared with a hot 8.2% in 2017. Sales of all other goods will increase 4.7% in 2018, a step up from 2017’s 3.9% and the best gain in seven years. E-commerce will have yet another banner year, growing by 15%, while in-store sales should do alright at 3.6%, their best showing since 2014.

Auto sales will rise only 2.6% after several years of heady growth and appear to be peaking. Yet the tax changes this year made it easier for businesses to purchase motor vehicles, which is helping the industry at a time when consumer demand is easing.

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Restaurant sales should jump 6.6% in 2018 – their best upturn since 2015 – since flush consumers eat out more than cash-strapped ones. But, eventually, most chains will find it harder to expand because of labor shortages, which will also curtail sales increases and boost wage costs.

Source: Department of Energy, Price Statistics