Consumer Behavior

NRF: Economy being rebalanced

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June 8, 2022

The National Retail Federation doesn't expect an "extreme cooling off" with regards to retail activity thanks to growth in hiring, wages and consumer spend.

The economy is "being rebalanced," said the industry group in a press release, and there likely won't be a major setback, according to NRF Chief Economist Jack Kleinhenz.

"With changes underway that focus on taming inflation without splintering the economy, the nation's economic system is in the process of being rebalanced in ways that are testing its resilience," Kleinhenz said in the release. "This is an extraordinary period with unprecedented factors that include inflation at a 40-year high, uncertainty over the war in Ukraine, supply chain disruptions and the Federal Reserve raising interest rates. There's good reason why businesses, consumers and policymakers alike all feel uneasy."

"Though many people fear an extreme cooling off of the economy, there is not an overwhelming amount of evidence to support such predictions," Kleinhenz said in the release. "In general, the data suggests that we remain in an ongoing expansion."

Consumer spending is shifting from the pandemic-era focus on goods toward services as people re-engage in activities they had cut back on, according to the NRF.

"The Fed has a tricky job on its hands," Kleinhenz said in the release. "Increased interest rates will mean higher borrowing costs across the economy at the same time higher prices keep eroding the purchasing power of the U.S. consumer. But the central bank needs to act in order to prevent inflation from being baked into the economy and to reduce the risk that expectations of inflation will become unanchored."