A retail economist says the US economy is resilient

A retail economist says the US economy is resilient

The U.S. economy continues to grow even as labor disputes across the country and uncertainty created by Congress add to the ongoing challenges of inflation and rising interest rates, NRF Chief Economist Jack Kleinhenz said today.

“As Gilda Radner used to say on Saturday Night Live, ‘If it’s not one thing, it’s another,’” Kleinhenz said. “This is definitely one of those times where that expression fits well with what’s happening in the economy.”

“New disruptions from an expanding autoworkers strike and the threat of a government shutdown — which could still happen after short-term funding measures passed by Congress expire — have added to the existing headwinds already facing the economy,” Kleinhenz said. “However, the economy continues to move and defies recession expectations, proving to be more resilient than expected.”

The new challenges come on top of interest rates at their highest level in two decades, gasoline prices on the rise since mid-summer, inflation still “nibbling away” at household budgets, declining consumer sentiment, and the resumption of student loan payments.

Kleinhenz’s comments came in the October issue of the NRF’s Monthly Economic Review, which said the final 2.1% increase in GDP reported by the Bureau of Economic Analysis for the second quarter came even after revisions that reflected less consumer spending on both goods and services than originally estimated. . Consumer spending grew, but was adjusted only 1.8% year-on-year for inflation instead of the original estimate of 2.3%, as spending on services such as household utilities and vehicle maintenance was revised down along with spending on goods such as home furnishings, appliances and clothing.

“While the data showed continued economic growth, the weaker growth as reflected in GDP revisions suggests that higher interest rates and tighter lending standards are at work more broadly than previously acknowledged,” Kleinhenz said. “Since higher interest rates typically slow the economy, the Fed will likely be happy to see that higher interest rates have an impact on employment, economic production and business outcomes.”

The report said that rising inflation and interest rates “weaken the expectations of many households” and consumer confidence fell for the second month in a row in September. The Conference Board’s Consumer Confidence Index fell 5.7 points to 103, and the University of Michigan Consumer Confidence Index fell to 68.1 from an already low August level of 69.5 as oil and gas prices continued to rise.

However, lower consumer confidence readings did not translate into weaker spending. Year-on-year spending rose 5.8% in August, tracking a 7.3% increase in disposable income. The increase came despite the Personal Consumption Expenditures Price Index – the Fed’s preferred measure of inflation – rising 0.4% from July in August and 3.5% year over year.

Kleinhenz said incoming data suggests the just-ended third quarter was largely on par with the second quarter and that 2023 could still see a “soft landing” rather than a recession. For example, “With the Fed keen to see job growth weaken without causing the unemployment rate to spike, a number of indicators suggest that the tight labor market is beginning to ease – but in the right way.”

Nonfarm payrolls gained 187,000 jobs in August, up from 157,000 in July but well below the average monthly gain of 271,000 over the past year. Meanwhile, the unemployment rate jumped 0.3 percentage points to 3.8% in August as more people looked for jobs.

After falling for three straight months through July, job openings rose to 9.6 million in August from 8.9 million in July but were well below the 10.2 million a year earlier. Employment rates rose slightly from 5.82 million in July to 5.86 million but were again below the previous year’s 6.5 million. Terminations, including layoffs, were essentially unchanged in August and declined after a slight increase earlier in the year. Unemployment insurance claims remain at historic lows and show no signs of an increase in layoffs, which could be a leading sign of an impending recession.

As the leading authority and voice in the retail industry, NRF analyzes the economic conditions impacting the industry through reports such as the Monthly Economic Review.

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