Download - US Consumer and Retail Outlook - TaxAdmin.org · US Consumer and Retail Outlook US Consumer Markets Outlook October 2018 Dr. Joel Prakken ... • High student debt burdens • Pent-up

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


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


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


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


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


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


Income and Wealth

10


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


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


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


-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


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


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


-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


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


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


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


Holiday retail sales categories 2018


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

IHS Markit Customer [email protected]: +1 800 IHS CARE (+1 800 447 2273)Europe, Middle East, and Africa: +44 (0) 1344 328 300Asia and the Pacific Rim: +604 291 3600

DisclaimerThe information contained in this presentation is confidential. Any unauthorized use, disclosure, reproduction, or dissemination, in full or in part, in any media or by any means, without the prior written permission of IHS Markit Ltd. or any of its affiliates ("IHS Markit") is strictly prohibited. IHS Markit owns all IHS Markit logos and trade names contained in this presentation that are subject to license. Opinions, statements, estimates, and projections in this presentation (including other media) are solely those of the individual author(s) at the time of writing and do not necessarily reflect the opinions of IHS Markit. Neither IHS Markit nor the author(s) has any obligation to update this presentation in the event that any content, opinion, statement, estimate, or projection (collectively, "information") changes or subsequently becomes inaccurate. IHS Markit makes no warranty, expressed or implied, as to the accuracy, completeness, or timeliness of any information in this presentation, and shall not in any way be liable to any recipient for any inaccuracies or omissions. Without limiting the foregoing, IHS Markit shall have no liability whatsoever to any recipient, whether in contract, in tort (including negligence), under warranty, under statute or otherwise, in respect of any loss or damage suffered by any recipient as a result of or in connection with any information provided, or any course of action determined, by it or any third party, whether or not based on any information provided. The inclusion of a link to an external website by IHS Markit should not be understood to be an endorsement of that website or the site's owners (or their products/services). IHS Markit is not responsible for either the content or output of external websites. Copyright © 2018, IHS MarkitTM. All rights reserved and all intellectual property rights are retained by IHS Markit.

Back-up Slides

25

Shipping Activity

26


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



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



28



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



29


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


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


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


-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


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


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


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


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


August retail sales report

38


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


Holiday retail sales


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


E-commerce share of retail trade surged in first half of the year

41

6.2 6.3 6.5 6.6 6.9 7.1 7.2 7.5 7.8 7.9 8.1 8.2 8.4 8.8 9.0 9.1 9.4 9.6

0

3

6

9

12

2014 2015 2016 2017 2018

Perc

ent

E-commerce share of total retail sales less restaurants



Online holiday retail sales


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


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


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


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


45


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