Rate hikes, high inflation no deterrent to shopping, NRF says
By Alan Wolf, YSN
Sure, consumers are spooked by high inflation and the Federal Reserve’s aggressive actions to curb it.
But neither the spiraling cost of goods and services nor the Fed’s unnerving series of interest rate hikes has stopped them from spending, the National Retail Federation (NRF) reported.
“Consumers have become cautious, but they have not stopped spending,” observed Jack Kleinhenz, chief economist for the trade association, based on the Census Bureau’s latest retail sales stats. “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.”
See: Confidence in Consumer Confidence
Indeed, retail sales rose 9.1% year-over-year in August, a rate that Kleinhenz deemed “healthy,” if not as dramatic as the double-digit increases retailers enjoyed throughout last year and into early 2022.
That said, the NRF exec acknowledged that “The economic situation in the United States is unsettling. 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.”
Those higher interest rates have driven up the cost of carrying credit card balances or financing a home or big-ticket purchase, and the combination of inflation and interest rate worries has consumer confidence at its lowest levels in years, Kleinhenz said. But consumers are becoming more optimistic, expecting inflation to fall to 5.7% next year from the current 8.3%, according to an August survey by the Federal Reserve Bank of New York, while many economists say a recession, if there is one, will likely be mild.
Kleinhenz’s remarks came in the October issue of NRF’s Monthly Economic Review, where he added that retailers are preparing for an early start to the holiday selling season despite concerns over the mixed economic outlook.