Retailers to Reap Benefits of Strong Consumer Spending Wave

Retail sales are expected to rise this year by the fastest pace since 2012.

Retailers are on track for a strong year, according to Michael McNamara, who runs SpendingPulse at MasterCard Advisors.

He is predicting that sales, excluding auto and gas, will jump more than 5 percent in 2018 as a whole as the strong jobs market and buoyant consumer confidence translate into more spending this year. If this materializes, it will be the fastest pace of growth since 2012.

“We're looking at good economic fundamentals. We're in good condition to have a really productive holiday season,” he said.

That was not the only good news the data guru had for the audience as it's not just the wealthy that are buying more, with spending up across the board.

While he has seen an increased rate of spending among those that make about $150,000 for a while, lower-income categories are also finally starting to see increased spending as a stronger economy makes families feel better off.

In particular, the sales growth rate for those who make under $50,000 doubled from 2 percent to 4 percent. That's important because they account for 40 percent of retail sales.

“It's really good to see a broad-based increase in spending that is powering some of the top line figures,” McNamara said.

As for specialty apparel, sales were up 5.6 percent in the year to September, with more of those occurring online than ever before as it now makes up 30 percent of specialty apparel sales. He expects sales to be up around 5.2 percent for the holiday season.

Women's, children's and family categories were all steadily improving over last several months, with a good back-to-school period across the board.

There were just two areas that weren't following suit. The first was footwear, which has been lagging behind other sectors, although McNamara was at a loss to explain why.

The second was that September luxury retail sales came in a little softer than expected, but McNamara believes a strong labor market, signs that wages are finally rising and resilient consumer confidence should be enough to fuel sales and in turn boost the economy.

He noted that only time will tell if ongoing turbulence in the stock market affects the luxury market.

“That's an area that we're watching. [But] the fundamentals from a spending perspective are all there for another very good holiday season,” he said.

There's also been a change in the busiest commerce shopping days for speciality apparel. It used to be Saturdays, but now it's Tuesdays and Wednesdays.

He added that it has had breakthroughs in technology, which will allow it to track sales across the country like monitoring the weather.

“Instead of getting snapshots that are outdated the minute you print them, turning things into streaming services so that you can see in the same way that you see a weather forecast every day. You're going to be able to see a sales forecast for every market in the country,” McNamara said.

“We have the capabilities now to study weather like we haven't before.”