John Furner President and CEO | Official website
Key elements of the economy are still growing but appear to have slowed enough to be on track for the Federal Reserve to lower interest rates later this year, National Retail Federation Chief Economist Jack Kleinhenz said today.
“The consumer environment has kept the expansion on a positive path toward a ‘soft landing’ despite high interest rates,” Kleinhenz stated. “Meanwhile, inflation has not yet been fully tamed, but we are seeing progress.”
Kleinhenz’s comments came in the August issue of NRF’s Monthly Economic Review, which noted that year-over-year gross domestic product growth rebounded to 2.8% in the second quarter, doubling the 1.4% seen in the first quarter and averaging out to 2.1% for the first six months of the year. Inflation as measured by the Personal Consumption Expenditures Price Index followed by the Fed fell to 2.6% year over year from 3.4% in the first quarter. This figure remains above the Fed’s target of 2%, but inflation was driven mostly by prices for services and was near-zero for retail goods.
In addition, “Job growth has been lumpy but has clearly moderated and is likely to keep the Federal Reserve on course to begin cutting interest rates later this year,” Kleinhenz said. The three-month average for payroll gains slowed to 177,000 jobs in June from 267,000 in March, indicating that while the economy is growing, it is also cooling down. Hiring fell from 5.7 million jobs in May to 5.3 million in June, and job openings decreased slightly from 8.23 million to 8.18 million during that period.
Retail sales data from the Census Bureau “showed a sturdy and adaptable U.S. consumer willing to spend despite cost pressures” during the second quarter, according to Kleinhenz. Total retail sales increased by 2.5% year over year in Q2 and by 2.8% for H1 of this year; core retail sales—excluding automobile dealers, gasoline stations and restaurants—rose by 3.2% over H1 of last year.
“While the overall economy continued to display remarkable strength in H1 of 2024, consumer confidence remains weak,” Kleinhenz added. With consumers wary of high prices for services, sentiment measured by University of Michigan’s monthly survey fell for four consecutive months—from a recent high of 79 in March down to 66 in July.
Nonetheless, consumers’ ability and willingness to spend “has been buoyed by job and wage gains” with disposable income up by 3.6% YOY in Q2 according to Kleinhenz's report.. A Federal Reserve Bank of New York survey shows consumers expect inflation will gradually slow over coming years: from an anticipated rate of about three percent next year down towards approximately two-point-eight percent within five years' time.
The Fed left interest rates unchanged this week; however Chairman Jerome Powell mentioned that "a rate cut could be on table" come September meeting
As leading authority voice representing interests across American retail sector , NRF continues its mission providing insightful analysis regarding economic conditions affecting industry via publications like Monthly Economic Review .
