Spending on Goods Could Take Precedent Over Dining, Entertainment

Little is certain about omicron’s impact on consumer demand, but people who stay at home because of the variant are more likely to spend their money on retail goods rather than dining out or in-person entertainment, according to National Retail Federation Chief Economist Jack Kleinhenz.

Kleinhenz remarked in NRF’s January Monthly Economic Review that such a scenario would put further pressure on inflation “since supply chains are already overloaded across the globe.”

Inflation, which was driven by shortages of goods as COVID-19 shut down factories and snarled supply chains while government stimulus fueled consumer spending, is likely to continue in 2022, but should eventually slow, NRF said.

The monthly review added, “Consumer spending propelled growth in 2021 and will continue to be a bright spot as 2022 unrolls. The current recession recovery cycle is very different from previous ones. Consumers have never been as wealthy as they are today. In fact, consumer wealth grew an additional 18.1% year-over-year in the third quarter, keeping well ahead of inflation. 

“If there is one lesson that we have learned it is not to underestimate the resilience of the consumer and, therefore, the US economy.”

Fed Suggests Supply-Chain Disruptions May Have Peaked

Meanwhile, forecasts from the Fed about supply-chain disruptions leveling off are adding to the narrative that supply chain dysfunction may be easing.

A new “barometer of global supply chain pressures” from the Federal Reserve Bank of New York suggests that “global supply chain pressures, while still historically high, have peaked and might start to moderate somewhat going forward.”

The NRF report was released Wednesday as retailers await next week’s release of the Census Bureau’s December retail sales data, which will complete the official total for sales during the 2021 holiday season.