The U.S. economy will likely be able to avoid a recession — and even potentially see growth — in 2023. That’s according to the National Retail Federation’s chief economist Jack Kleinhenz, who said the economy appears “more resilient than expected” in his monthly economic review for February.
“While households will probably feel recession-like conditions this year, I do not expect that the downturn will be severe enough to become an official recession,” Kleinhenz wrote. He added that there will still likely be economic challenges this year, such as inflation, which will likely affect different sectors of the economy at different times.
The prediction comes after a Kleinhenz warned in January that the Federal Reserve would need to strike a balance between inflation and soaring interest rates to avoid a recession in 2023. The Federal Reserve on Wednesday raised interest rates another 0.25 percentage point as the body looks to continue to combat inflation, which has begun to show signs of cooling. Consumer prices rose by 6.5% in December compared to the prior year, marking the smallest 12-month increase since the period ending in October 2021 and a slowdown from November’s 7.1% and October’s 7.7% year over year growth.
At the same time, a hot labor market means a higher likelihood of wage inflation, as companies compete to hire and maintain talent, which could drive inflation. The number of job openings jumped to 11 million in December, according to data released Wednesday by the Bureau of Labor Statistics.
Despite the challenges, consumer spending has continued to show signs of growth. Total sales in 2022 were up 9.2% from 2021, according to data from the U.S. Census Bureau. Total sales for the October 2022 through December 2022 period were up 6.7% from the same period a year ago.
“I continue to see a sluggish pace of growth in economic activity during 2023,” Kleinhenz said.