Consumers Still Spending but Cautious as Recession Threat Grows: NRF
Consumers are still spending despite becoming cautious amid an “unsettling” economic climate in the U.S., said National Retail Federation Chief Economist Jack Kleinhenz Monday. “Consumer confidence is down, consumer spending’s rate of growth has slowed, and economists and consumers alike…
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are worried about the possibility of a recession, all reflecting persistently high inflation and rising interest rates,” he said. After saying in August the economy was “unlikely” to enter a recession this year (see 2208020067), Kleinhenz updated the view Monday, citing economists who say “a recession -- if there is one -- will likely be mild.” Some 38% of blue chip economists now believe the Fed will be able to rein in inflation without triggering a recession, vs. 51% in August, Kleinhenz said. The panel sees a 42% chance that a recession will begin this year and a 54% chance that it will begin in 2023. Spending growth slowed vs. 2021, “but households continue to spend each month as more jobs, wage growth and savings backstop their finances and help them confront higher prices,” he said. Consumer spending “held up better than expected” in August, with overall retail sales growing 0.3% from July, and 9.1% year on year vs. double-digit increases last year, Kleinhenz noted. Higher interest rates have driven up the cost of carrying credit card balances or financing a home or car, he said: “The combination of inflation and interest rate worries has consumer confidence at its lowest levels in years despite an uptick in September.”