Healthy economy spurs retail sales

DAYTON, Ohio -- Retail sales are growing even more than expected as a strong economy draws higher consumer confidence. But more shoppers are expressing concerns about the economic unknowns throughout the rest of 2018.

Shoppers are expected to spend more this year with extra disposable income, a strong job market and record-high household worth, the National Retail Federation said Monday. The organization previously predicted that retail sales would grow between 3.8 percent and 4.4 percent in 2018 but recently updated its forecast, expecting retail sales to increase a minimum of 4.5 percent year-over-year.

"Consumers have more disposable income vis-a-vis the tax cuts at the end of late last year," said Gordon Gough, president of the Ohio Council of Retail Merchants. "Folks are seeing more dollars in their paycheck ... which is giving them more comfort to spend more."

The consumer sentiment index, which measures how households perceive the health of the economy, reached 97.9 out of a possible 100 in July, up 4.5 points from July 2017, according to the University of Michigan's consumer surveys.

Larger retailers have seen sales increases, including Kroger. The company recorded a 2.8 percent year-over-year sales increase in quarter one of 2018 when excluding fuel and effects from the sale of the company's convenience store.

Many analysts say the United States is at full employment, the most desirable level of employment where all who are willing and able to work are employed.

Consumer and business confidence is high right now, but several unknowns like tariffs and geopolitical issues can affect the economy. Consumer confidence can also be weakened by a sharp decline in the housing market or a substantial downturn in the stock market, Gough said.

While the first half of the year fared better than expected, the second half holds obstacles with tariffs shaking some consumers' faith in the economy. The University of Michigan's study found an increasing concern across political parties, where 35 percent of households surveyed spontaneously mentioned that tariffs would have a negative economic impact, up from 21 percent in June and 15 percent in May.

In July, tariffs of 25 percent went into effect on $34 billion worth of Chinese goods and are scheduled to take effect on another $16 million this month, the federation said in a release. While both lists contained a relatively low number of consumer products, another round of tariffs on $200 billion of goods currently under consideration would include more of the items consumers regularly buy from China.

"We don't want to see these economic gains derailed by protectionist trade policy," said federation President and CEO Matthew Shay. "With retailers ramping up imports and stocking their warehouses before most of the proposed tariffs will take effect, an immediate impact on prices on consumer goods is unlikely, but that won't last for long."

But Gough and the National Retail Federation said they remain optimistic about retail's near future.

"There are many factors that can impact our forecast, but our overall outlook is optimistic," said federation Chief Economist Jack Kleinhenz. "Spending was weaker than expected at the beginning of the first quarter but has grown more rapidly since then, and we continue to anticipate strong sales during the second half of 2018."

Business on 08/15/2018

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