Consumers Keep on Spending, Undeterred by Inflation, Rising Interest Rates

Despite an “unsettling” economic situation in the US, consumer spending has not slowed, according to a report this week from the National Retail Federation (NRF).

It’s now a wonder what would curtail consumers, as high inflation, rising interest rates and fears of a recession seem to have done little other than have Americans rely on wage growth and savings to “backstop their finances and help them confront higher prices,” NRF chief economist Jack Kleinhenz said in prepared remarks. “Many economists say a recession – if there is one – will likely be mild.”

Kleinhenz’s remarks came in the October issue of NRF’s Monthly Economic Review, which noted that consumer spending held up better than expected in August as overall retail sales reported by the Census Bureau grew 0.3% from July and 9.1% year over year.

Year-over-year increases in retail sales cooled this year compared to last and now stand at upper single-digits.

Optimism Taking Hold

Consumers are becoming more optimistic, the NRF reported, “expecting inflation to be at only 5.7% a year from now [according to an August survey by the Federal Reserve Bank of New York], down from 6.2% expected a month earlier.

“Consumers expect inflation to be at 2.8% three years from now rather than their earlier expectation of 3.2%, and 2% in five years.”