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Economic Forecasts

Consumers Not Done Spending, Despite Some Downturns

Kiplinger’s latest forecast on retail sales and consumer spending


GDP Third-quarter growth a solid 3.5%, but slowdown is coming More »
Jobs Unemployment rate will decline further in '19 More »
Interest rates 10-year T-notes at 3.6% by end ’19 More »
Inflation 2.3% in ’19, the same as in ’18 More »
Business spending Up 7% in ’18, boosted by expanded tax breaks More »
Energy Crude trading from $65 to $70 per barrel in March More »
Housing 5.46 million existing-home sales in '18, down 1.5% More »
Retail sales Growing at least 4% in ’19 (excluding gas and autos) More »
Trade deficit Widening 7%-8% in ’19 More »

Total retail and food-service sales rose a strong 0.8% in October, but after stripping out robust car sales and higher gasoline prices, they ticked up just 0.3%. Some bounce-back was expected after Hurricane Florence disrupted activity in September, and flooding tends to be a boon for new-car sales. We still expect holiday receipts to grow at least 4%, which is above average for the past decade. Consumer inflation-adjusted income is still growing at close to 3%, the best rate in three years.

A few cautions: Restaurant spending did not to return as expected after the hurricane. It’s possible that the sudden stop to stock market gains may be dinging consumer spending on luxuries a bit. Car sales will likely settle back down into slow-growth mode. And in-store sales downshifted after a strong first half of the year. Expect in-store holiday sales to increase at a 2.8% rate.

2018 will go down as a good year for retail. Sales, excluding gasoline and autos, will grow 4.9%, better than 2017’s 4.2% pace, and the best since 2011. Sales of building materials are advancing at a more sustainable 3.7% rate, compared with a hot 8.2% in 2017. Sales of all other goods will swell 4.6% 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, jumping 15%, while in-store sales should do all right at 3.4%, their best showing since 2014. After several years of heady growth, auto sales appear to be peaking and will end the year up just 2.4%. The boost from replacement of hurricane-damaged cars should end soon.

Retail sales in 2019 are expected to slow a bit, but still expand at least 4%.

Source: Department of Energy, Price Statistics