WASHINGTON DC – The economy is still growing, but not as fast as it was earlier this year, National Retail Federation Chief Economist Jack Kleinhenz said recently.
„The U.S. economy continues to expand, but the latest data points to a slowdown in its pace,” Kleinhenz said. “The economy is slowing, but not stopped.
„There has been progress in fighting inflation, but high prices remain,” Kleinhenz said. „While consumers are still spending, the mix of their spending continues to favor services over retail goods, and even then, there was less momentum in the third quarter.”
Kleinhenz’s comments appeared in the September issue of NRF Monthly Economic SurveyThe Bureau of Economic Analysis now estimates that gross domestic product grew at an annual rate of 2.1 percent adjusted for inflation in the second quarter, rather than 2.4 percent.
Gross domestic income, which measures the value of wages, rents, interest and corporate profits earned during production, rose by a more modest 0.5 percent annual rate. Average GDP and GTI rose by 1.3 percent.
Personal expenses are high
The economy added 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. The unemployment rate rose 0.3 points to 3.8 percent in August, as more people entered the labor market looking for work.
Wages and salaries grew just 0.4 percent in July, down from 0.6 percent in June.
Despite weaker-than-average job gains, slower wage growth and higher unemployment, personal spending rose 0.8 percent in July, up from 0.6 percent growth in June.
With spending growth outstripping income growth, the savings rate fell to 3.5 percent in July from 4.3 percent in June, „suggesting that consumers are digging into their funds to support household spending.”
„Consumer confidence took a slight hit in August as higher prices and interest rates weighed on buyers’ decisions,” Kleinhenz said.
The Conference Board’s consumer confidence index fell to 106.1 from 114 in July, while the University of Michigan’s consumer sentiment index fell from 71.6 in July — the best reading since October 2021 — to 69.5 in August.
The Federal Reserve’s preferred measure of inflation, the personal consumption expenditures price index, rose 0.2 percent in July for the second month in a row. Year-on-year, PCE increased by 3.3 percent compared to 3 percent in June.
Retail sales have increased
Despite persistent inflation and low consumer confidence, retail sales as measured by the NRF — which focuses on core retail sales excluding automobile dealers, gas stations and restaurants — „surprised” and rose 3.8 percent year-on-year in July. Sales received „a mid-term boost” from Amazon’s Prime Day, special deal days offered by other retailers and entertainment-related events.
But Kleinhenz said the number was somewhat inflated compared to lower sales at the same time last year.
Spending on services grew only a seasonally adjusted 1.6 percent in the second quarter from the first quarter, down from 3 percent growth in the first quarter, which has been increasing since pandemic restrictions ended and consumers returned to dining, travel and entertainment. To the Census Bureau.
NRF Forecast for March 2023 retail sales will increase 4 percent to 6 percent over 2022. However, the central bank’s interest rate hike has dampened the economy and “there is a good chance that the sell-off will end in the lower range of the forecast. No less,” Kleinhenz said.
As the leading authority and voice for the retail industry, NRF analyzes economic conditions affecting the industry through reports like Monthly Economic Survey.