So Much For All That (Knock on Wood) Recession Talk?

Written by Rob Stott

July 14, 2023

American consumers are turning out to be quite the resilient bunch, according to nearly every major statistical figure you can find. In a year where economists, business leaders, politicians, and your next door neighbor all have been talking about the doom and gloom that’s on the horizon, that can keeps getting kicked further and further down the road.

Our latest glimmer of hope comes from the National Retail Federation’s monthly economic review for July 2023, which offers a recap of the first half of the year in addition to some leading indicators for the back half of the year.

All things told, the first half of 2023 turned out to be even better than expected, according to NRF.

“The first half of the year is over and the economy is still moving in the right direction,” Jack Kleinhenz, NRF’s chief economist, said in a recent release. “While its rhythm, tone and pattern have slowed, it has not stalled and recently revised data shows underlying strength that seems to be rolling forward.”

Klienhenz’s comments come as data from the Bureau of Economic Analysis showed GDP for the first quarter of the year was adjusted for inflation, actually growing 2 percent year over year, rather than the 1.1 percent that was initially reported. In addition, BEA adjusted the personal savings rate upward to 4.3 percent from 3.4 percent.

BEA also reported that consumer spending, which accounts for 70 percent of GDP, grew at a rate of 4.2 percent during the first quarter, which was up over four-fold from the previous quarter’s 1 percent growth — the fastest growth rate since mid-2021 and in spite of the strong headwinds in inflation and high interest rates.

A quick dive into the Census Bureau’s retail sales data shows similarly optimistic figures. May 2023 saw 0.3 percent gains month-over-month with over $686.6 billion in retail sales. But year-over-year, consumer spending grew 1.6 percent. Total sales over the trailing three months (March to May) were also up 1.7 percent over the same period last year. A closer lens into the Census’ category-specific data shows that the home furnishings industry is down 2.9 percent year-to-date compared to the same five-month period last year, while electronics and appliance stores are down 2.7 percent.

“The resiliency of the U.S. consumer will be tested in the coming months as economic headwinds are likely to impair spending,” Kleinhenz added. However, with $500 billion in excess savings built up during the pandemic and continued employment growth, he calls consumers “the path of least resistance to economic growth,” and notes that they are “doing their part to keep the economy moving ahead.”

Challenges remain, of course. With inflation still above where the Feds would like to see it, it’s likely we’ll see rates continue to rise. And, not to be forgotten, student loan payments are set to come due this fall for the first time since the pandemic. Those factors combined could put a slight dampening on consumer spending over the back half of the year.


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