NRF: Americans Still Spending Despite Inflation Concerns

Consumers in the US remain worried about high inflation and Federal Reserve interest rate hikes intended to bring inflation under control, but neither has stopped them from spending, National Retail Federation (NRF) Chief Economist Jack Kleinhenz said.

“The economic situation in the United States is unsettling,” Kleinhenz said. “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,” Kleinhenz said. “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’s remarks came in the October issue of NRF’s Monthly Economic Review, which noted that 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 Fed, which had kept interest rates low over the past two years to counter the impact of the pandemic, hiked rates another three-quarters of a percentage point in September, bringing its current rate to between 3% and 3.25%. The central bank plans to continue increases until inflation – which was at 8.3% in August – cools to about 2%.

Gross domestic product declined 1.6% year over year in the first quarter and 0.6% in the second quarter, sparking fears since two consecutive quarterly declines in GDP – while not the official definition – typically mark a recession. But the highly respected Blue Chip Economic Indicators panel of business economists, which includes Kleinhenz, is forecasting 1.2% growth in the just-ended third quarter and 0.6% in the fourth quarter continuing into 2023.

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