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Economic Forecasts

Consumers Are Feeling Good

Kiplinger's latest forecast on retail sales and consumer spending

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GDP 2.9% pace in '18, up from 2.3% in '17 More »
Jobs A tight labor market will make hiring more difficult 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 $65 to $70 per barrel in July More »
Housing Price growth: 5.0% by end of '18 More »
Retail sales Growing 4.9% in '18 (excluding gas and autos) More »
Trade deficit Widening 5%-6% in '18 More »

Sales surged 0.8% in May, following two pretty good months in March and April. After a winter respite, monthly sales picked up to where they left off after last year’s strong growth. Clothing sales have surged for the second month as warmer weather has finally come to stay. This also benefitted department stores, which had their best two months in four years. Warm weather likely helped restaurant sales as well. In-store sales climbed 0.8% in May, their strongest gain in seven months.

2018 as a whole should be a good year for retail. Sales, excluding gasoline and autos, will grow 4.8%, better than 2017’s 4.2% pace. Building materials’ sales are humming, with 5.1% growth compared to 8.2% in 2017. Sales of all other goods will advance 4.8% 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 15%, while in-store sales should do alright at 2.9%, their best showing since 2014.

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>Auto sales will rise only 2.6% after heady years. The tax changes make it easier for businesses to purchase motor vehicles, which will help the industry in a year of easing consumer demand.

Restaurant sales should increase 4.6% in 2018, a bit more than 2017’s 3.2%, as flush consumers eat out more than cash-strapped ones. However, the restaurant boom of 2011-16 is likely over. Some chains will find expansion harder because of labor shortages, which will also 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