Slow Start After a Good Holiday Season

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Kiplinger's latest forecast on retail sales and consumer spending


GDP 3.0% pace in '18, up from 2.3% in '17 More »
Jobs Unemployment rate down to 3.8% by end '18 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 $55 to $60 per barrel in April More »
Housing Existing-home sales up 1.6%, new-home sales up 9.8% in '18 More »
Retail sales Growing 4.6% in '18 (excluding gas) More »
Trade deficit Widening 5%-6% in '18 More »

Retail and food-service sales dipped in January, but cold weather could be to blame. The unusually cold temperatures in much of the southeastern United States may have slowed sales of motor vehicles, restaurant meals and building supplies after a strong holiday season. February’s report will likely show that consumers resumed spending, but analysts will look closely for any signs of consumer spending fatigue, despite consumer optimism remaining high.

Holiday sales surged 5.9% in 2017, the best season since 2005. Both in-store and out-of-store sales benefited from the splurge. E-commerce and catalog sales picked up 12.3%, accounting for 16% of all goods sold during the holidays. Americans bought 9.3% more building supplies. Other in-store sales were also strong, rising 3.8%, their best since 2014.

2018 should be a good year for retail. Sales, excluding gasoline, will grow 4.6% — better than 2017’s 4.2% pace. Consumers’ wealth gains will lead to more home improvement projects and will keep building materials flying off the shelves: 9.0% more compared to 8.2% more in 2017. Sales of all other goods will advance 4.7% 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, notching 15% more sales, while in-store sales should do all right at 3.0%, their best showing since 2014.

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Auto sales will rise modestly 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.

Restaurant sales should rise 4.6% in 2018, a bit more than 2017’s 3.2%, as 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 make it difficult to goose sales. Higher minimum wages will also boost menu prices.

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Source: Department of Energy, Price Statistics