May 11, 2023 — According to the National Retail Federation (NRF)’s chief economist Jack Kleinhenz, slower but continued growth in economic indicators such as gross domestic product (GDP) during the first quarter reflected the difficulty of bringing inflation under control.
 
In NRF’s latest Monthly Economic Review, Kleinhenz acknowledges that the World Health Organization has declared the pandemic over, but that does not mean the resulting economic challenges are over as well. “For the past year, the Federal Reserve has been trying to bring rampant inflation under control by raising interest rates. The effort has yet to reach its goal, and results from the first quarter show taming inflation without tipping the nation into a recession remains a formidable challenge,” he says. “A slowdown in GDP is normally seen as a negative, but in the current context, [it] is key to controlling inflation. Fortunately, the economic data is not consistent with a typical recession.”
 
Even as GDP growth slowed to a 1.1% annual rate from the average 3% in the previous two quarters, Kleinhenz said the U.S. economy “remained in gear.” Accounting for two-thirds of GDP, consumer spending grew 6.5% up from 0.1% growth in the previous quarter as disposable personal income saw annual growth of 8.4%.
 
According to the Employment Cost Index, growth in private manufacturing wages salaries dropped to 4.8% in Q1 from 5.1% the quarter before but remained above the 3.5% rate necessary to meet the Fed’s 2% inflation target. Moving into the second quarter, employment numbers were better than expected, the NRF shares, despite high interest rates, showing a net jobs gain of 253,000, a year-over-year wage increase of 4.4%, and the unemployment rate of 3.4% tying with January for the lowest in more than 50 years.
 
The Personal Consumption Expenditures Price Index reports inflation was 4.9% year over year in Q1, down from 5.7% in the fourth quarter and 6.4% from a year earlier.
 
For more information: nrf.com.