The US economy’s fast-paced growth could slow somewhat as the Federal Reserve tries to bring inflation under control in the next few months, but consumers are likely to keep on shopping as lower inflation eases uncertainty, National Retail Federation (NRF) Chief Economist Jack Kleinhenz said.
“The Fed’s tightening has kicked off a new cycle of adjustment and the outlook for interest rates has consequences for consumers and businesses alike,” Kleinhenz said. “There is a growing list of uncertainties, and the risks are mounting. But underlying strength and momentum from both the consumer and business sectors are likely to offset a modest slowdown and should leave the economy bustling forward this year.”
While the Fed’s actions could mean higher car and mortgage payments, Kleinhenz said household finances have remained strong despite consumers’ worries over inflation and the war in Ukraine. The 4% year-over-year increase in retail sales in March showed consumers have the willingness and ability to spend as a result of job growth, wage gains and wealth accumulated during the pandemic as well as low financial obligations relative to income.
Kleinhenz’s remarks came in the May issue of NRF’s Monthly Economic Review, which said inflation, though still strong, should slow in 2022, partly because year-over-year comparisons will be against already-elevated levels of spending in 2021. In addition, fiscal and monetary policies from the Fed and other agencies that have combined with ongoing pandemic-induced supply issues to drive inflation are coming to an end.