While consumers remain concerned about both inflation and the Federal Reserve interest rate hikes intended to curb it, they continue to spend, National Retail Federation chief economist Jack Kleinhenz said in his group’s Monthly Economic Review.
“The economic situation in the United States is unsettling,” Kleinhenz said in a statement. “Nonetheless spending continues to grow, and many economists say a recession—if there is one—will likely be mild.
“Consumers have become cautious, but they have not stopped spending,” Kleinhenz said. “The rate of growth is not as high as last year, but households continue to spend each month as more jobs, wage growth, and savings backstop their finances and help them confront higher prices.”
Kleinhenz noted that consumer spending held up better than expected in August. Retail sales reported by the U.S. Census Bureau grew 0.3% from July and 9.1% year-over-year. Since spring, the retail sales increase has been mostly in the upper single digits. That’s not as dramatic as the double-digit numbers seen for most of 2021 and in early 2022, but it’s still healthy, the NRF said.
U.S. gross domestic product (GDP) declined 1.6% year-over-year in the first quarter and 0.6% in the second quarter. By some measures, two consecutive quarterly declines in GDP mark a recession, though that’s not the official definition.
But now, GDP is growing again, albeit not substantially. The respected Blue Chip Economic Indicators panel of business economists forecast 1.2% growth in the just-ended third quarter, and a 0.6% increase in the fourth quarter continuing into 2023, the NRF said.
Only 38% of Blue Chip economists believe the Fed will be able to rein in inflation without triggering a recession—down from 51% in August. Yet, 95% of them said that, if there is a recession, it will likely be mild. The panel sees a 42% chance that a recession will begin this year and a 54% chance that it will begin in 2023.
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