Despite expectations for slower growth of both gross domestic product (GDP) and retail sales, the economy should continue to do well the remainder of this year, National Retail Federation (NRF) Chief Economist Jack Kleinhenz said today.
“No one can accurately forecast what surprises the next year might hold, but the foundation of the economy is relatively sturdy and still on a sustainable path,” Kleinhenz said, adding that the continuing recovery remains “highly reliant” on consumer spending. “Barring unexpected shocks, it should continue growing in 2024, although not spectacularly.”
In the April issue of its Monthly Economic Review, the NRF forecast last month that retail sales will grow between 2.5% and 3.5% in 2024. While that marks a slowdown from the unusually rapid growth seen since the pandemic, the projection is in line with the 10-year pre-pandemic average of 3.6%. Overall economic growth is expected to be modest, but consumer spending should hold up as inflation slows gradually and job growth remains positive even as unemployment rises.
Adjusted for inflation, GDP is expected to grow about 2.3% year over year, slower than last year’s 2.5% but still strong enough to sustain the job growth that drives consumer spending. Consumer spending is expected to be up about 2%, which compares with 2.3% last year.
“Consumers’ behavior and spending power are tied to their financial health, and the consumer sector looks good at the moment,” Kleinhenz said. “No one could have imagined when the COVID-19 recession ended in April 2020 that we would have experienced such a resilient expansion that is now headed toward its fifth year.”
Meanwhile, the NRF said that inflation has fallen meaningfully, due to a combination of moderating wage growth, supply chain healing, slightly weaker consumer demand, and higher interest rates. While there was a slight reacceleration in prices at the start of 2024, Kleinhenz expects inflation to steadily move down and be at 2.2% year over year by the end of the year.
And that means that interest rates could soon be on their way down, too. Kleinhenz said he expects the Fed to hold rates steady until June, when it will likely cut rates a quarter of a percentage point before repeating that move with subsequent cuts in September and December.
