NRF: As Economy Recovers, Consumers Spend

Shoppers are still willing to make retail purchases even as smaller job and wage gains and high interest rates hamper the growth of consumer spending, said National Retail Federation chief economist Jack Kleinhenz, in the NRF’s Monthly Economic Review.

“U.S. economic growth for the remainder of this year will depend on several factors but particularly the pace of job growth, inflation, and what actions will be taken by the Federal Reserve,” said Kleinhenz. “The good news is that the economy is growing, inflation is moderating, and overall fundamentals look fine as increased consumer spending supports underlying momentum.”

The review found that gross domestic product is still expected to grow about 2.3 percent in 2024 over 2023 but that employment is now expected to grow by a monthly average of 180,000 jobs, about 50,000 higher than expected this spring. On the spending side, inflation as measured by the Personal Consumption Expenditures Price Index should drop to about 2.2 percent by the end of the year, close to the Federal Reserve’s target of 2 percent, according to the report.

“The biggest change in the economic outlook since our initial projections is that immigration has been much stronger,” said Kleinhenz, adding that the Congressional Budget Office now expects that net immigration in 2023 was 3.3 million, much higher than the previous 1 million estimate. “New immigrants have increased the supply of workers, raising production capacity, closing some shortages in the labor market, and allowing the economy to generate jobs without overheating and accelerating inflation.”

The availability of more workers can help limit wage-driven inflation, and increased immigration “explains some of the surprising strength in consumer spending since 2022,” said Kleinhenz.