US' economic momentum slows but remains positive: NRF

While the economy is slowing down, it is not halting. Progress has been seen in combatting inflation, but higher prices persist. Despite the slowed momentum going into the third quarter (Q3), consumers maintain their spending.

A downward revision of the gross domestic product (GDP) growth in the second quarter, with a 2.1 per cent annual rate adjusted for inflation, compared to the earlier reported 2.4 per cent has been observed. Additionally, the gross domestic income (GDI), which encapsulates wages, rent, interest, and corporate profits earned in production, exhibited a modest rise of a 0.5 per cent annual rate. On average, both the GDP and GDI escalated by 1.3 per cent, as per recent data from the Bureau of Economic Analysis.

The US economy saw the addition of 187,000 jobs in August, a rise from July's 157,000, albeit lower than the average monthly gain of 271,000 witnessed over the past year. Concurrently, the unemployment rate increased by 0.3 points, reaching 3.8 per cent as more individuals entered the job market.

Furthermore, wage and salary growth decelerated, registering a mere 0.4 per cent increment month over month in July, a decrease from June's 0.6 per cent. Despite these developments, personal spending surged by 0.8 per cent in July, a notch higher than the 0.6 per cent growth seen in June.

As spending growth overtakes income growth, the savings rate experienced a dip, reducing to 3.5 per cent in July from June’s 4.3 per cent. This trend indicates that consumers are delving deeper into their finances to uphold household spending.

“Consumer confidence took a bit of a hit in August as high prices and interest rates weighed on shoppers’ decisions,” said Kleinhenz. Evidently, the Conference Board's Consumer Confidence Index fell to 106.1 in August from 114 in July, while the University of Michigan Consumer Sentiment Index also saw a reduction, standing at 69.5 in August down from July’s 71.6.

The Personal Consumption Expenditures (PCE) Price Index, the Federal Reserve's favoured inflation measure, remained at a 0.2 per cent increase month over month in July, with a year-over-year rise of 3.3 per cent, showcasing a 0.3 per cent hike compared to June’s figures.

Despite these economic headwinds, NRF reported an unexpected increase in retail sales, which, after excluding automobile dealers, gasoline stations, and restaurants to focus on core retail, elevated by 3.8 per cent year over year in July. This uplift was partly due to Amazon's Prime Day, special deal days from other retailers, and entertainment-related events.

Notwithstanding, Kleinhenz warned that the upbeat numbers were partly influenced by a comparison to the lower sales recorded during the same period last year.

With the Fed's recent interest rate hikes slowing the economy, Kleinhenz anticipates a possibility of sales finishing in the lower spectrum of NRF's initial forecast of a 4-6 per cent increase over 2022, made in March this year. The NRF Chief Economist emphasised that there is a good chance that sales will end up in the lower range of the forecast, if not lower.

Fibre2Fashion News Desk (DP)