The National Retail Federation’s (NRF) Chief Economist, Jack Kleinhenz, reported that the GDP is not likely to grow as much in the final months of 2022 as it did in the third quarter, but consumer spending should remain strong even though the rapid pace continues to slow.
“The third quarter’s results clearly dispelled the notion that the U.S. economy is in a recession, and the silver lining was the ongoing resiliency in consumption,” Kleinhenz noted. “Nonetheless, the economy is cooling, and interest-sensitive sectors, in particular, have seen a significant pullback.”
“GDP is expected to grow very gradually in the closing months of 2022, at best about half of what was recorded in the third quarter,” Kleinhenz continued. “Consumers are stepping back to a degree and changing how they allocate their resources.”
However, Kleinhenz said, “Even though both may slow, employment will still be growing, and consumer spending should remain positive” heading into 2023. “There will be economic hardships, and some may feel like they’re in a recession, but for those who have jobs and feel secure about their employment, spending will continue.”
Kleinhenz’s remarks came in the December Issue of NRF’s Monthly Economic Review, which noted that the GDP rose by 2.6 percent in the third quarter following declines of 1.6 percent in the first quarter and 6 percent in the second quarter.
The report said that higher interest rates adopted by the Federal Reserve to slow inflation drove up mortgage costs, making new homes unaffordable for many buyers, and spending on services continues to bounce back from the pandemic, causing a shift from spending at retail.
Even with inflation, however, “the willingness to spend has been stable,” the report noted. Retail sales for the first ten months of 2022 increased 7.5 percent year-over-year, on track to meet the NRF’s forecast that overall 2022 retail sales and November/December holiday sales would grow between 6 percent and 8 percent over 2021. At the same time, the pace slowed to 6.5 percent in October, mainly due to the comparison against strong early holiday shopping in 2021.
As measured by the Consumer Price Index, year-over-year inflation dropped from 8.2 percent in September to 7.7 percent in October, the lowest level since January. Average hourly wage growth also slowed to 4.7 percent year-over-year in October rather than 5 percent in September, reducing pressure on employers to raise prices. An additional 261,000 workers were added to payrolls in October, but that came after the number of job openings rose to 10.7 million in September from 10.3 million in August.
Photo courtesy King of Prussia Mall