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NRF: Consumers Are Still Spending, Despite Inflation

Inflation hasn’t deterred consumer spending just yet, the National Retail Federation (NRF) said on Monday.

Despite headwinds in the macroeconomic environment, such as inflation and high interest rates, consumers are still shelling out for purchases. NRF’s chief economist Jack Kleinhenz said in his monthly economic review that while the economic environment in the U.S. is “unsettling” and consumer confidence is down, spending has persisted.

“Consumers have become cautious – but they have not stopped spending,” Kleinhenz said, adding that while the rate of spending growth is not as high as last year, household purchases are are bolstered by wage growth and a strong labor market.

Retail sales were $683.3 billion in August, according to the U.S. Census Bureau. This marked an increase of 0.3% from the numbers July, which were amended to reflect $681.3 billion. However, sales were up 9.1% compared with August 2021. Within retail, sales were up 0.2% from July, and up 8.9% from August 2021. Non-store retailer sales were up 11.2% from last year.

Between June 2022 through August 2022, total sales were up 9.3% compared to the same period in 2021. However, these spending numbers are not adjusted for inflation, which explains certain large spending surges in categories like gasoline, where sales were up 29.3% from August 2021.

While inflation has begun to show signs of cooling, consumer prices increased 8.3% in August from a year ago, down from a 40-year high of 9.1% in June and 8.5% growth in July.

Last month, the Federal Reserve raised interest rates by 0.75 points, marking its third consecutive hike of that size in an effort to curb inflation. Rates now sit in a range between 3% and 3.25% and the committee anticipates additional increases moving forward, with a goal to return inflation to 2%.

Meanwhile, the labor market has remained robust. The U.S. economy added 315,000 jobs in August, just below estimates of 318,000. This number represented a dip from July, which saw 526,000 jobs added. The unemployment rate in August rose to 3.7%.

Despite the continuous spending, experts have predicted holiday sales growth to slow this year compared to growth in 2021. Deloitte’s retail and consumer products team projects holiday sales will total $1.45 trillion to $1.47 trillion during the November to January timeframe, growing between 4% and 6% over last year. In 2021, retail sales between November and January grew 15.1% and totaled $1.39 trillion, according to the U.S. Census Bureau.

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