Coming up on two years since the short-lived 2020 recession, the United States appears to be at the midpoint of an economic cycle that should continue to see growth even as the Federal Reserve raises interest rates to bring inflation under control, National Retail Federation (NRF) Chief Economist Jack Kleinhenz said.<\/p>\n\n\n\n
\u201cThe maturing economy remains in growth mode and there is good reason to expect it will soon approach normal trends,\u201d Kleinhenz said. \u201cDespite ongoing challenges, we are clearly still in an expansion phase. The question is how long it will last as policymakers strike a delicate balance between encouraging growth and taming inflation.\u201d<\/p>\n\n\n\n
\u201cIt is not clear how Fed policy will develop, and there will be indigestion as we adjust to new policies,\u201d Kleinhenz said. Nonetheless, both households and businesses are \u201cin good financial shape,\u201d Covid-19 is having less of an impact on economic activity \u201cand there is plenty of room to raise rates without threatening the economy,\u201d he said.<\/p>\n\n\n\n
Kleinhenz\u2019s remarks came in the February issue of NRF\u2019s Monthly Economic Review, which said the economy \u201cis running hotter than it has in a long time\u201d despite the end of federal intervention like stimulus checks and expanded unemployment benefits. The economy \u201cis sturdy enough to stand on its own and can sustain itself toward a growth environment without the pandemic stimulus and monetary policy policies of the past two years,\u201d the report said.<\/p>\n\n\n\n
Gross domestic product was up 5.7% in 2021 from 2020, the fastest growth for any calendar year since 1984, and household spending continued to grow in the fourth quarter even though not as quickly as earlier in the year. Kleinhenz expects GDP to grow between 3% and 4% in 2022, still faster than the 2.3% annual pace during the 2009-2020 expansion that was ended by the pandemic.<\/p>\n\n\n\n
The rapid increase in economic growth has come amid the highest inflation in nearly 40 years, with the Consumer Price Index up 7% year-over-year as of December, according to the Bureau of Labor Statistics. In response, the Federal Reserve said last week \u201cit will soon be appropriate\u201d to raise interest rates to tighten the availability of credit and help bring inflation under control. Rate hikes will make mortgages, car loans and other credit more expensive, but \u201chouseholds are poised to spend\u201d anyway, partly because of savings accumulated during the pandemic, Kleinhenz said.<\/p>\n\n\n\n
The recovery follows the brief-but-intense recession seen in early 2020, which the National Bureau of Economic Research said lasted only from February to April and was the shortest in US history. Kleinhenz said the \u201cquick, deep decline\u201d followed by a \u201cfast, steep recovery\u201d amounted to an economic \u201cmini-cycle\u201d in sharp contrast to normal economic cycles that have averaged about five-and-a-half years of gradual shifts from expansion to recession and back since the end of World War II.<\/p>\n\n\n\n
Understanding economic cycles is important as policymakers consider appropriate policy moves: \u201cThe key to extending the expansion is to balance growth, inflation and interest rates,\u201d Kleinhenz said. \u201cClearly, this expansion is different from the past, and the policy approach will be different.\u201d<\/p>\n","protected":false},"excerpt":{"rendered":"
Coming up on two years since the short-lived 2020 recession, the United States appears to be at the midpoint of an economic cycle that should continue to see growth even as the Federal Reserve raises interest rates to bring inflation under control, National Retail Federation (NRF) Chief Economist Jack Kleinhenz said. \u201cThe maturing economy remains…<\/p>\n","protected":false},"author":1,"featured_media":13704,"comment_status":"open","ping_status":"closed","sticky":false,"template":"","format":"standard","meta":{"footnotes":""},"categories":[83],"tags":[],"thb-sponsors":[],"class_list":["post-13694","post","type-post","status-publish","format-standard","has-post-thumbnail","hentry","category-bulletin"],"acf":[],"yoast_head":"\n