NRF: U.S. economy on track to end year on high note

The U.S. economy is closing out 2023 in good health, according to the National Retail Federation (NRF).

NRF chief economist Jack Kleinhenz said that after a year of challenges, the U.S. economy has proven to be healthy even as it continues to slow. 

“The U.S. economy is on track to end 2023 with vigorous growth for the year,” Kleinhenz said. “A strong labor market, rising wages and access to excess savings have helped spending continue despite inflation and higher interest rates.”

Kleinhenz’s comments came in the December issue of NRF’s Monthly Economic Review, which said gross domestic product growth (GDP) for the year is now expected to come in at 2.5% adjusted for inflation over 2022, which Kleinhenz said is much higher than expected a year ago.

GDP grew at an annualized pace of 3.2% over the first three quarters and rose 5.2% in the third quarter but is expected to slow to 1.2% in the fourth, according to the Federal Reserve Bank of Atlanta’s GDPNow model.

Gross domestic income (GDI), which goes beyond the value of products produced to include wages, rent, interest and corporate profits earned during production, was up only 1.5% in the third quarter, also adjusted for inflation, following 0.5% in the second quarter. 

This marked the fourth consecutive quarter in which GDI grew less than GDP, which Kleinhenz said “adds to the argument that the economy is slowing” even though neither metric indicates that growth has halted.

Slower GDP and GDI growth is in line with consumer spending, which rose 0.2% month-over-month in October 2023, down from 0.7% in September for the slowest pace since May 2023. 

Similarly, retail sales reported by the Census Bureau were down 0.1% month-over-month seasonally adjusted in October 2023 after a 0.9% increase the previous month; and year-over-year retail sales growth fell from 4.1% unadjusted to 2.5%. 

Census Bureau data indicates that households have reduced spending on automobiles, furniture and clothing but are spending more on travel, health care and housing.

Other economic findings reported by the NRF include:

• Hiring held steady in October 2023, but job openings were at their lowest level since March 2021 and unemployment was at its highest level since March 2021.
• The Personal Consumption Expenditures Index – the measurement of inflation followed by the Federal Reserve – was at 3% year over year in October 2023, the lowest level in two-and-a-half years. Personal spending rose 5.3% year over year in October while disposable personal income grew 7%.

“The remarkably resilient consumer has been the story of 2023,” Kleinhenz said.

[Read more: Overall story for holiday season 'looks very good,' says NRF economist]