The U.S. economy’s rate of growth is slowing, but consumers remain financially healthy and the nation is unlikely to enter into a recession during the remainder of 2022, the National Retail Federation (NRF) said in a forecast today.
“I am not betting on an official recession in the near term, but the most recent research pegs the risk over the next year as about one in three and it will be touch and go in 2023,” NRF Chief Economist Jack Kleinhenz said in a release. “In the meantime, a contracting economy short of a recession is not out of the question.”
The consumer outlook over the next few months remains favorable, providing a counterweight to the prospect of a downturn or whether it will meet the threshold of a recession, he said. “The economy is moving away from extremely strong growth toward moderate growth, but increased income from employment gains, rising wages and more hours worked is expected to support household spending,” Kleinhenz said.
According to the July issue of NRF’s Monthly Economic Review, U.S. job openings and quit rates suggest that the labor market remains tight, payroll growth remains sturdy despite a slowdown in May, and the unemployment rate has remained at 3.6%– just above a 50-year low seen before the pandemic – for three months in a row.
Those forces have combined to prop up retail sales, which were expected to drop in May but actually remained unchanged from April and grew 6.7% year over year. Those numbers come as consumers rebalance their spending as the covid pandemic eases its grip, driving increases in experiences—including restaurant sales and airline traffic—instead of physical goods.
Despite that moderate economic forecast from NRF, the transportation sector analysis firm ACT Research had a stormier prediction. The Columbus, Indiana-based firm today said that its analysts think the probability of a mild recession is now nearly as likely as that of their base-case scenario, which is a modest slowdown of topline freight growth.
ACT’s president and senior analyst, Kenny Vieth, acknowledged the healthy consumer spending figures that the NRF report had cited, but said trouble is in the wind.
“With the current head of steam that includes healthy consumer and business balance sheets, strong employment demand, and pent-up manufacturing sector activity, this inflation driven economic slowdown is on one hand somewhat unique,” Vieth said. “On the other, traditional recession predictors are in play: Fed rate hikes, high energy prices, negative exogenous events, and falling equity valuations come to mind. Some have called the current period of turbulence, unprecedented, and there is a growing consensus around the notion that we promote here: A slowdown is coming. We don’t know if it will be shallower or deeper.”
