The U.S. economy is unlikely to slip into a recession this year and will probably see slight growth, according to National Retail Federation (NRF) chief economist Jack Kleinhenz in the NRF’s Monthly Economic Review.
That doesn’t mean the economic picture is rosy, with Kleinhenz noting that inflation and high interest rates are continuing to squeeze consumer wallets.
“A month into 2023, the economy is facing stiff headwinds and—with the exception of easing inflation—will likely face more challenges before it gets better,” Kleinhenz said. “[W]hile households will probably feel recession-like conditions this year, I do not expect that the downturn will be severe enough to become an official recession.”
Consumer spending grew 2.8% in 2022, but slowed in the last two months of the year. The NRF called 2022’s holiday sales “choppy,” saying that consumers had grown increasingly cost-conscious. Even though its numbers showed November–December holiday sales rose 5.3% over 2021’s, growth was slower than many expected.
Still, the retail group proclaimed the overall U.S. economy “resilient.”
“Corporate and household balance sheets are in the best shape we’ve seen going into a downturn,” Kleinhenz said. “This should make any economic slowdown mild and limit the downside risks despite my outlook for the economy to straddle a zero-growth path during 2023.”
And though the labor market is tightening, small businesses continue to hire, with the unemployment rate at 3.5%, a 50-year low, according to the NRF. The biggest layoffs are mostly limited to technology companies.
Last year, the gross domestic product (GDP) dropped in two consecutive quarters—which is the standard, if unofficial, definition of a recession. Following those first two quarters of negative growth, GDP rose 3.2% year-over-year in the third quarter of 2022, before slowing to 2.9% in the fourth. Overall the GDP in 2022 was 2.1% above 2021’s.
The National Bureau of Economic Research has declined to officially dub last year’s two-quarter dip a recession, as the decline affected only certain sectors of the economy and was not a broad-based fall.
(Photo: Getty Images)
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