NRF: Recession Near-Term Unlikely As Economic Growth Slows

While the economic rate of growth in the U.S. is slowing, the likelihood of a recession in 2022 remains low, according to Jack Kleinhenz, chief economist at the National Retail Federation (NRF).

“I am not betting on an official recession in the near term, but the most recent research pegs the risk over the next year as about one in three and it will be touch and go in 2023,” he said. “In the meantime, a contracting economy short of a recession is not out of the question.”

Kleinhenz’s remarks came in the July issue of NRF’s Monthly Economic Review, which said economic data is “softer than a few months ago” but “still signals further solid economic growth.”

Retail sales as calculated by NRF – which exclude automobile dealers, gas stations and restaurants to focus on core retail – were expected to drop in May but remained unchanged from April and grew 6.7% year over year. Sales were up 7.3% for the first five months of the year compared with 2021. Overall household spending – beyond just retail sales – is expected to rise 9% next year for a new high.

Job openings and quit rates suggest that the labor market remains tight, payroll growth remains sturdy despite a slowdown in May, and the unemployment rate has remained at 3.6% – just above a 50-year low seen before the pandemic – for three months in a row, according to the report. A closely watched survey of manufacturing from the Institute of Supply Management showed that suppliers’ deliveries had improved in May as demand, orders and order backlogs grew.

“Regardless of the prospect of a downturn or whether it will meet the threshold of a recession, the consumer outlook over the next few months remains favorable,” Kleinhenz said. “The economy is moving away from extremely strong growth toward moderate growth, but increased income from employment gains, rising wages and more hours worked is expected to support household spending. Policy issues will likely be the deciding factor shaping the economic outlook this year and next.