NRF: Economic data does not support an impending recession


WASHINGTON, DC – Economic numbers may not look good, the National Retail Federation (NRF) does not see a recession looming at the next turn.

Despite two consecutive quarters of decline, the US economy still does not appear to be in recession and is unlikely to enter one this year, NRF chief economist Jack Kleinhenz said Aug. 2.

“Back-to-back contractions have increased fear of a recession, but as the economy lost momentum heading into the second half of the year, the economic data is not yet consistent with a typical recession,” Kleinhenz said.

“Our view is that even if the economy is operating at a slower pace, it will likely avoid a recession this year,” he added. “Despite continuing uncertainties, we believe the underlying strength of the economy is strong enough to weather inflation and prevent a recession – or short-lived one, however wrong we are.”

Kleinhenz’s remarks appeared in the August issue of NRF’s Monthly Economic Review (MER), which noted that gross domestic product (GDP) fell 1.6% year-over-year in the first quarter and 0.9% in the second quarter.

As explained by the NRF, two consecutive quarters of decline is a common informal indicator of a recession, but the official statement belongs to the National Bureau of Economic Research, which defines a recession as a significant decline distributed across the ‘economy. The bureau has yet to decide whether the current downturn meets that definition.

Even with two quarters of declining GDP, private final sales to domestic buyers – a key measure of consumer and business spending – remained in positive territory in the first half, up 3% in the first quarter and flat in the second, says the MER report.

Other indicators, including employment, retail sales, revenue and industrial production, saw slower growth, but none contracted.

A critical indicator that could signal the onset of a recession would be a significant decline in employment, Kleinhenz said. But the unemployment rate stood at 3.6% in June, almost half a percentage point lower than at the start of the year and only slightly above the 50-year pre-pandemic low. 3.5% observed in January 2020.

Additionally, payroll increased at an average monthly rate of 539,000 in the first quarter and 375,000 in the second quarter. And retail sales as defined by NR, excluding car dealerships, gas stations and restaurants to focus on core retail, were up 7% year-over-year in the first six months of the year, according to the Washington, DC-based retail industry group.

However, even with strong economic indicators, Kleinhenz said “it is now clear that the world has changed” since the start of the year, citing factors that could not have been anticipated earlier, including the persistence of COVID-19. , ongoing supply chain challenges, the ongoing war in Ukraine and other issues that have led to the highest inflation rates in 40 years.

In light of the headwinds, NRF has adjusted several levers that affect its economic outlook, including:

NRF now expects GDP to grow 2% for the year instead of 3.5%.

Growth in the personal consumption expenditure price index, the Federal Reserve’s preferred measure of inflation, is now expected to average 6.2% for 2022.

The savings rate is expected to decline as consumers dip into their pandemic-era savings to pay for high food and energy costs as well as discretionary spending on travel and entertainment.

NRF also factored in revised retail sales figures released by the Census Bureau in April, which increased NRF’s calculation of retail sales for 2021 to $4.61 trillion from $4.58 trillion. dollars.

Even with these adjustments, NRF continues to expect 2022 retail sales to grow between 6% and 8% from 2021.

“At this point, the primary concern remains inflation and the Fed’s policy actions to contain it,” Kleinhenz said. “As the central bank tries to adjust its monetary policy, it faces the dangers of continued inflation if it doesn’t do enough and recession if it goes too far. Consumer reaction to price hikes rate is hardly immediate or predictable, making it impossible to judge the effect of Fed reactions in real time and quickly correct any oversteer.”

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