June 7, 2023 — According to the June edition of the National Retail Federation (NRF)’s Monthly Economic Review, the nation does not appear to be in a recession despite conflicting signs from various economic indicators.
 
“Today’s economy is a lot like looking into a kaleidoscope, with the view changing and the data providing a different reflection of what’s happening every time you look,” says NRF chief economist Jack Kleinhenz. “Depending on which data you view in the economic kaleidoscope, you get two different angles on the state of the consumer. While survey data shows consumers do not have much confidence in the economy, actual spending data shows they were upbeat as the second quarter kicked off.”
 
According to Kleinhenz, consumer spending is supported by a strong job market and rising wages—forces that counter rising prices and higher borrowing costs. “While it’s difficult to reconcile these views,” he says, “what we’ve learned over the last several years is don't count the American consumer out—at least not yet.”
 
First-quarter data show that gross domestic product (GDP) grew at an annualized rate of 1.1% rather than the original estimate of 1.3%. Additionally, the average of GDP and gross domestic income (GDP-GDI average) decreased 0.5% in the first quarter following a decrease of 0.4% in the fourth quarter. According to Kleinhenz, “[The GDP-GDI average] suggests that GDP likely overstates U.S. economic growth, and that higher interest rates, tighter credit, and persistent inflation are having more of a concerted effect on the direction of the economy than suggested by GDP alone.” Further, he expects GDP to grow about 1% in 2023.
 
Kleinhenz acknowledges that aggressive tightening of credit by the Federal Reserve has resulted in a recession every time it was attempted since 1970, but tightening interest rates was successful in slowing the economy and inflation without a recession in 1994-1995 and 2015-2018.
 
According to Kleinhenz, the latest state coincident indexes produced by the Federal Reserve Bank of Philadelphia have increased in every state except Alaska in the past three months, and a study by the Federal Reserve Bank of St. Louis says that at least half of the indexes need to show negative growth to reasonably declare the nation’s economy is in recession.
 
The NRF shares that the University of Michigan Consumer Confidence Index, which had risen to 64.9 in January after a record low of 50 last June, was at 59.2 in May, a 4.3-point drop from April. However, personal consumption was up 6.7% in April compared to last year while personal disposable income was up 4.7%, indicating that “the economy is holding up better than many have argued,” says Kleinhenz.
 
According to the Personal Consumption Expenditures Price Index, year-over-year inflation was at 4.4% in April, compared with 4.9% in the first quarter and 5.7% in the fourth quarter.
 
For more information: nrf.com.