The National Retail Federation (NRF) is out with its assessment of August spending, concluding that while “consumers remain worried about high inflation and Federal Reserve interest rate hikes intended to bring inflation under control,” they are not so worried that they’ve stopped spending. The rate of spending growth may have slowed a bit, but “consumer spending held up better than expected in August as overall retail sales reported by the Census Bureau grew 0.3% from July and 9.1% year over year. Year-over-year increases in retail sales have been mostly in the upper single digits since spring, not as dramatic as the double-digit numbers seen most of last year into early 2022 but still healthy.”
“The economic situation in the United States is unsettling,” says NRF Chief Economist Jack Kleinhenz. “Consumer confidence is down, consumer spending’s rate of growth has slowed, and economists and consumers alike are worried about the possibility of a recession, all reflecting persistently high inflation and rising interest rates. 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. 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.”
NRF goes on with its analysis:
“Higher interest rates have driven up the cost of carrying credit card balances or financing a home or car, and the combination of inflation and interest rate worries has consumer confidence at its lowest levels in years despite an uptick in September. But consumers are becoming more optimistic, expecting inflation to be at only 5.7% a year from now, according to an August survey by the Federal Reserve Bank of New York, down from 6.2% expected a month earlier. Consumers expect inflation to be at 2.8% three years from now rather than their earlier expectation of 3.2%, and 2% in five years.”
For what it is worth, America’s CEOs largely seem to be more pessimistic than consumers – Fox News reports on a new KPMG survey saying that “ninety-one percent of CEOs surveyed believe there will be a recession in the next 12 months. Only one-third of those CEOs believe it will be a short and mild recession. Some CEOs are considering workforce reductions, roughly half of the CEOs are thinking about whether they need to reduce workforce.”
I think I tend to side with the CEOs on this one – I hope they’re wrong, but I think they may be right. American consumers may be suffering from some sort of mass delusion – we’ve been drinking the kool-aid for so long, thinking that the good times will go on forever and that the bill would never come due. I’m old enough to know/remember that the bill always has to get paid at some point.
The post NRF: Consumer Confidence Down, But Spending Still Grows appeared first on MNB.View Original Article