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Economic Forecasts

2018 Will Be Another Good Year for Retail

Kiplinger's latest forecast on retail sales and consumer spending

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GDP 3.0% pace in '18, up from 2.3% in '17 More »
Jobs Slower job gains likely this year as labor market tightens More »
Interest rates 10-year T-notes at 3.2% 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 $60 to $65 per barrel in June More »
Housing Price growth: 5.0% by end of '18 More »
Retail sales Growing 4.2% in '18 (excluding gas and autos) More »
Trade deficit Widening 5%-6% in '18 More »

Retail sales rebounded significantly in March, after a three-month decline. A surge in auto sales accounted for much of the that, but other sectors showed growth as well. This indicates that spending has likely turned the corner and is heading up. Although cool spring weather across much of the country is hurting sales at clothing, home improvement and department stores, the situation should turn around once warmer weather sets in. But department stores will see only modest growth.

2018 should be a good year for retail. Sales, excluding gasoline and autos, will grow 4.2%, a bit better than 2017’s 4.1% pace. Bigger consumer bank accounts will lead to more home improvement projects and will keep sales of building materials humming once warmer weather comes, with 6.2% growth, compared with 8.2% in 2017. Sales of all other goods will advance 4.0% 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 2.4%, their best showing since 2014.

Auto sales will rise only 2.4% 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 otherwise will see consumer demand ease.

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Restaurant sales should rise 3.7% in 2018, a bit more than 2017’s 3.2%, because 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