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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 »

Retail and food service sales growth slowed to a 0.1% rise in August, but that followed a strong July. Spending has done very well since March, indicating how much cuts to personal tax rates have boosted consumers’ willingness to splurge. Spending on meals out, typically a discretionary item, has been phenomenal the past six months, which also indicates that consumer sentiment is 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.

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Auto sales will rise only 2.1% after heady growth in recent years and appear to be peaking. Yet the tax changes this year made it easier for businesses to purchase motor vehicles, which will help the industry at a time when consumer demand is easing.

Restaurant sales should jump 7.2% in 2018 – their best growth since 2015 – since flush consumers eat out more than cash-strapped ones. These sales have also defied predictions of a slowdown. But, eventually, most chains will find it harder to expand because of labor shortages, which will also curtail sales increases and boost wage costs.

SEE ALSO: 6 Retailers That Can Stand Up to Amazon

Source: Department of Energy, Price Statistics