Economics
US Consumer and Retail Outlook
US Consumer Markets Outlook
October 2018
Dr. Joel PrakkenVP, Co-head of US Economics, Chief US Economist
James BohnakerAssociate Director, US Macro & Consumer Economics
Federation of Tax Administrators, Revenue Estimating & Tax Research ConferenceSan Diego, CA; October 8, 2018
Confidential. © 2018 IHS MarkitTM. All Rights Reserved.
Forces affecting consumer spending
Positive forces• Employment growth
• Income tax cuts
• Accelerating wage rates
• Elevated consumer confidence
• Rising net worth
• Broadening income distribution
Negative forces• Rising interest rates
• Rising inflation
• High student debt burdens
• Pent-up demand for autos is played out
2
Consumer confidence
3
Confidential. © 2018 IHS MarkitTM. All Rights Reserved.
Consumer confidence is riding ever higher
20
40
60
80
100
120
140
160
1980 1984 1988 1992 1996 2000 2004 2008 2012 2016
Inde
x, 1
985
= 10
0, S
A
Conference Board Consumer Confidence Index
Source: Conference Board, IHS Markit © 2018 IHS Markit
4
Confidential. © 2018 IHS MarkitTM. All Rights Reserved.
Gap between current conditions and consumer expectations
-100
-75
-50
-25
0
25
50
75
100
1980 1984 1988 1992 1996 2000 2004 2008 2012 2016
Inde
x po
ints
Recession Difference between present situation and expectations
Conference Board Consumer Confidence Index
Source: Conference Board, IHS Markit © 2018 IHS Markit
5
Consumer Prices
6
Confidential. © 2018 IHS MarkitTM. All Rights Reserved.
Consumer price inflation has reached the Federal Reserve’s 2% target
-1
0
1
2
3
4
2000 2002 2004 2006 2008 2010 2012 2014 2016 2018 2020 2022
Year
-ove
r-yea
r % c
hang
e
Personal consumption deflator Excluding food and energy
Personal consumption deflators
Source: IHS Markit © 2018 IHS Markit
7
Confidential. © 2018 IHS MarkitTM. All Rights Reserved.
Pump prices have stalled since the summer
1.50
2.00
2.50
3.00
3.50
4.00
4.50
2010 2011 2012 2013 2014 2015 2016 2017 2018
Dolla
rs p
er g
allo
n
Gasoline price, DOE all grades
8
© 2018 IHS MarkitSource: Department of Energy, IHS Markit
Confidential. © 2018 IHS MarkitTM. All Rights Reserved.
Prices and tariffs
9
140
160
180
200
220
240
260
80
90
100
110
120
130
2007 2009 2011 2013 2015 2017
Inde
x, 1
982=
100,
NSA
CPI - laundry equipment (left) PPI - steel mill products (right)
Inde
x, 1
982-
1984
=100
, SA
CPI for laundry equipment and PPI for steel mill products
Source: IHS Markit © 2018 IHS Markit
Income and Wealth
10
Confidential. © 2018 IHS MarkitTM. All Rights Reserved.
0
10
20
30
40
50
60
70
2004 2006 2008 2010 2012 2014 2016
Thou
sand
s of
201
7 do
llars
Real median household income made strides in last three yearsReal median household income
11
Confidential. © 2018 IHS MarkitTM. All Rights Reserved.
0
20
40
60
80
100
2001 2003 2005 2007 2009 2011 2013 2015 2017 2019 2021
Trill
ions
of d
olla
rs
Financial Real estate & other nonfinancial
Household assets revised upward, still rising
Household assets
12
Confidential. © 2018 IHS MarkitTM. All Rights Reserved.
0
3
6
9
12
15
1980 1985 1990 1995 2000 2005 2010 2015
Perc
ent
Before July 2018 revision After revision
Personal saving rate revision
Personal saving rate before and after July 2018 NIPA revisions
13
Consumer spending
14
Confidential. © 2018 IHS MarkitTM. All Rights Reserved.
-2
0
2
4
6
1990 1993 1996 1999 2002 2005 2008 2011 2014 2017 2020
Perc
ent c
hang
e
Real consumer spending Real disposable income
Tax cuts and job growth are boosting real disposable income, supporting consumer spending and savingReal consumer spending and disposable income
15
Lower personal tax rates boost disposable income
Confidential. © 2018 IHS MarkitTM. All Rights Reserved.
0
4
8
12
16
20
1980 1985 1990 1995 2000 2005 2010 2015 2020
Mill
ions
of u
nits
, ann
ual r
ate
Total Light Trucks Cars
Light trucks will continue to outsell cars
Total light-vehicle sales
16
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The recovery in housing starts is nearing completion
0.0
0.3
0.6
0.9
1.2
1.5
1.8
2.1
1980 1985 1990 1995 2000 2005 2010 2015 2020 2025
Mill
ions
Single-family housing starts Multifamily housing starts
Housing starts and formation
17
Retail trade
18
Confidential. © 2018 IHS MarkitTM. All Rights Reserved.
-6 -4 -2 0 2 4 6 8 10 12
Restaurants
Non-store retailers
Miscellaneous store retailers
General merchandise
Sporting goods and hobby
Apparel stores
Health and personal care stores
Food stores
Building materials
Electronics
Furniture and home furnishing
Total retail sales
Percent change, current dollars2016 2017 2018 2019
Retail sales outlook
Retail sales outlook
19
Confidential. © 2018 IHS MarkitTM. All Rights Reserved.
Clicks outpacing the bricks
0
10
20
30
40
50
60
2004 2006 2008 2010 2012 2014 2016 2018
Billi
ons
of d
olla
rs, S
A
Electronic shopping and mail order Department stores
Department and online stores retail sales
20
Confidential. © 2018 IHS MarkitTM. All Rights Reserved.
Restaurants to eat up greater share of spending on food
40
45
50
55
60
2010 2012 2014 2016 2018 2020 2022
Perc
ent
Food and beverages Restaurants
Proportion of consumer spending on food
21
© 2018 IHS MarkitSource: IHS Markit
Confidential. © 2018 IHS MarkitTM. All Rights Reserved. 22
Holiday retail sales
Source: IHS Markit © 2018 IHS Markit
Holiday retail sales shaping up to be another good year
5.24.6
2.63.0
5.0
3.2 3.2
5.35.0
0
1
2
3
4
5
6
2010 2011 2012 2013 2014 2015 2016 2017 2018(f)
Perc
ent c
hang
e fro
m a
yea
r ear
lier
Notes: NSA November and December total retail sales less auto dealerships, gasoline, and food services, and food stores
Confidential. © 2018 IHS MarkitTM. All Rights Reserved. 23
Holiday retail sales categories 2018
Source: IHS Markit © 2018 IHS Markit
Almost all retail categories expected to grow in 2018 Holiday season
-4% 0% 4% 8% 12% 16%
Electronic shopping and mail-order houses
Nonstore Retailers
Restaurants
Clothing and Accessories Stores
Building Materials/Garden Supply
Health and Personal Care Stores
Food Stores
General Merchandise
Electronics and Appliances Stores
Furniture and Home Furnishing Stores
Miscellaneous Store Retailers
Department Stores
Motor vehicle and parts dealers
Sporting Goods, Hobby, Book, Music
Perc
ent c
hang
e fro
m a
yea
r ear
lier
2017 2018
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Back-up Slides
25
Shipping Activity
26
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Shipping activity has spiked in 2018
0.8
0.9
1.0
1.1
1.2
1.3
1.4
1990 1994 1998 2002 2006 2010 2014 2018
Inde
x, J
an-9
0=1.
000
Source: Cass Information Systems, IHS Markit © 2018 IHS Markit
Cass Freight Index: Shipments
27
Confidential. © 2018 IHS MarkitTM. All Rights Reserved.
Shipping activity has spiked in 2018
0.8
0.9
1.0
1.1
1.2
1.3
1.4
2005 2007 2009 2011 2013 2015 2017
Inde
x, J
an-9
0=1.
000
Not seasonally adjusted Seasonally adjusted
Source: Cass Information Systems, IHS Markit © 2018 IHS Markit
Cass Freight Index: Shipments
28
Confidential. © 2018 IHS MarkitTM. All Rights Reserved.
Shipping activity has spiked in 2018
0.9
1.0
1.1
1.2
1.3
1.4
2012 2013 2014 2015 2016 2017 2018
Inde
x, J
an-9
0=1.
000
Source: Cass Information Systems, IHS Markit © 2018 IHS Markit
Cass Freight Index: Shipments
29
Confidential. © 2018 IHS MarkitTM. All Rights Reserved.
Consumer sentiment is upbeat, supported by improving household finances and robust job growth
50
60
70
80
90
100
110
120
1980 1984 1988 1992 1996 2000 2004 2008 2012 2016
1966
= 1
00
University of Michigan Index of Consumer Sentiment
Source: University of Michigan, IHS Markit © 2018 IHS Markit
30
Confidential. © 2018 IHS MarkitTM. All Rights Reserved.
Consumer sentiment by household income
50
60
70
80
90
100
110
120
2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016 2017 2018
Income < $75,000 Income > $75,000
Consumer sentiment by household income
Source: University of Michigan, IHS Markit © 2018 IHS Markit
1966
= 1
00
31
Confidential. © 2018 IHS MarkitTM. All Rights Reserved.
Small business optimism surged after the 2016 election and has exceeded its 45-year record high
80
84
88
92
96
100
104
108
112
2000 2002 2004 2006 2008 2010 2012 2014 2016 2018
Inde
x, 1
986=
100,
SA
NFIB Small Business Optimism Index
32
Confidential. © 2018 IHS MarkitTM. All Rights Reserved.
-10
-5
0
5
10
15
Lowestquintile
Secondquintile
Third quintile Fourthquintile
Highestquintile
Top 5percent
Perc
ent c
hang
e be
twee
n ye
ars
2008-13 2008-14 2008-15 2008-16 2008-17
Incomes pushed past prerecession levels for most households in last three yearsReal mean household income by quintile
33
Confidential. © 2018 IHS MarkitTM. All Rights Reserved.
American household average income
50
60
70
80
90
1997 1999 2001 2003 2005 2007 2009 2011 2013 2015 2017
Thou
sand
s of
201
7 do
llars
Median Mean
American real household income
34
Confidential. © 2018 IHS MarkitTM. All Rights Reserved.
Poverty rate pushed lower over last three years
10
11
12
13
14
15
16
1984 1988 1992 1996 2000 2004 2008 2012 2016
Perc
ent
Percent of Americans below poverty level
35
Confidential. © 2018 IHS MarkitTM. All Rights Reserved.
Goods vs. services inflation vary widely
-1
0
1
2
3
4
2013 2014 2015 2016 2017 2018 2019 2020
Perc
ent c
hang
e fro
m a
yea
r ear
lier
CPI core goods CPI core services
Core consumer prices excluding food and energy
36
Confidential. © 2018 IHS MarkitTM. All Rights Reserved.
Pump prices have stalled since the summer
-40
-20
0
20
40
60
2010 2011 2012 2013 2014 2015 2016 2017 2018
Perc
ent c
hang
e fro
m a
yea
r ear
lier
Gasoline price, DOE all grades
37
© 2018 IHS MarkitSource: Department of Energy, IHS Markit
Confidential. © 2018 IHS MarkitTM. All Rights Reserved.
August retail sales report
38
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Online shopping retail sales
20
30
40
50
60
70
Jul-13 Jul-14 Jul-15 Jul-16 Jul-17 Jul-18
Billi
ons
of d
olla
rs
Seasonally adjusted Nonseasonally adjusted
Electronic shopping and mail order sales
39
Confidential. © 2018 IHS MarkitTM. All Rights Reserved. 40
Holiday retail sales
Source: IHS Markit © 2018 IHS Markit
Holiday retail sales shaping up to be another good year
3.4
2.1 2.1
5.1
6.86.2
3.22.7
-4.7
0.2
5.24.6
2.6 3.0
5.0
3.2 3.2
5.3 5.0
-6
-4
-2
0
2
4
6
8
2000 2003 2006 2009 2012 2015 2018(f)
Perc
ent c
hang
e fro
m a
yea
r ear
lier
Notes: NSA November and December total retail sales less auto dealerships, gasoline, and food services, and food stores
Confidential. © 2018 IHS MarkitTM. All Rights Reserved.
E-commerce share of retail trade surged in first half of the year
41
6.2 6.3 6.5 6.66.9 7.1 7.2
7.5 7.8 7.98.1 8.2 8.4
8.8 9.0 9.19.4 9.6
0
3
6
9
12
2014 2015 2016 2017 2018
Perc
ent
E-commerce share of total retail sales less restaurants
Source: IHS Markit © 2018 IHS Markit
Confidential. © 2018 IHS MarkitTM. All Rights Reserved. 42
Online holiday retail sales
Source: IHS Markit © 2018 IHS Markit
Online will take a bigger share of the pie
0
2
4
6
8
10
12
14
16
18
20
2009 2010 2011 2012 2013 2014 2015 2016 2017 2018(f)
Perc
ent
Online share of total holiday retail Online holiday retail sales, y/y growth
Confidential. © 2018 IHS MarkitTM. All Rights Reserved.
General merchandise subcategory sales
0
20
40
60
80
100
120
140
2007 2009 2011 2013 2015 2017 2019 2021
Billi
ons
of d
olla
rs
Department Stores Warehouse Clubs & Superstores Dollar & Other
Retail sales: general merchandise by subcategory, SA
43
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Clothing store subcategory sales
0
2
4
6
8
10
12
14
18
20
22
24
26
28
30
32
2007 2009 2011 2013 2015 2017 2019
Billi
ons
of d
olla
rs
Family (left axis) Men (Right) Women (Right)
Clothing store sales, SA
44
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E-commerce retail share expanding
0
5
10
15
20
25
2001 2003 2005 2007 2009 2011 2013 2015 2017 2019 2021
Perc
ent
E-commerce retail share of total retail sales excluding food, gas, and autos, SA
Source: IHS Markit © 2018 IHS Markit
45
Confidential. © 2018 IHS MarkitTM. All Rights Reserved.
0.0
0.1
0.2
0.3
0.4
0.5
0.6
0.7
2003 2006 2009 2012 2015
Average hours per day during weekends and holidays
Men Total Women
Americans’ time spent shopping
Source: Bureau of Labor Statistics: American Time Use Survey
0.0
0.1
0.2
0.3
0.4
0.5
0.6
0.7
2003 2006 2009 2012 2015
Average hours per day during weekdays
Men Total Women
46
