National Retail Federation (NRF) Chief Economist Jack Kleinhenz said late last week that the economy remains “healthy” even as it slows down a bit.
“The U.S. economy is on track to end 2023 with vigorous growth for the year,” Kleinhenz said. “A strong labor market, rising wages and access to excess savings have helped spending continue despite inflation and higher interest rates.”
NRF projects that “gross domestic product growth for the year is now expected to come in at 2.5% adjusted for inflation over 2022, ‘much higher than expected a year ago’.”
Kleinhenz said the “’resiliency of the consumer is being tested’ by a number of factors beyond inflation and interest rates. Excess liquidity built up during the pandemic is shrinking and access to credit has become more expensive as banks have become more cautious, with both curbing the purchasing power fueled by job and wage gains. Hiring held steady in October, but job openings were at their lowest level since March 2021 and unemployment was at its highest level since March 2021.
“On the positive side, the Personal Consumption Expenditures Index – the measurement of inflation followed by the Federal Reserve – was at 3% year over year in October, the lowest level in two-and-a-half years. Overall finances are in ‘good shape’ and personal spending rose 5.3% year over year in October while disposable personal income grew a ‘healthy’ 7%.
“Consequently, ‘continued consumer resilience’ is expected during the holiday season, which began November 1 and continues through the end of December. NRF expects record spending and has forecast holiday retail sales to increase between 3% and 4% over 2022, consistent with pre-pandemic growth rates.”
KC’s View:
I know that there are pockets of America where “healthy” is not the word that would be applied to the economy, where high prices have outstripped wage increases, and where high interest rates continue to put pressure on consumers.
But I think it is fair to say that in general, the economy is better than almost anyone suggested a year ago, and that the benefits of an improving economy are likely to expand to more people and places in the coming months.
We cannot be deaf to the concerns of those for whom the economy has not improved, but considering we’ve been through unprecedented stresses over the past few years because of the pandemic and frankly, a sometimes hit-and-miss approach to dealing with its economic impact, it is remarkable that we are where we are.
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