The National Retail Federation (NRF) has forecasted a steadier economic environment for the remainder of the year.
NRF’s Chief Economist, Jack Kleinhenz, outlined the expectations for economic and retail growth in the April issue of NRF’s Monthly Economic Review, predicting a more tempered pace in the growth of gross domestic product (GDP) and retail sales.
Economic Forecast and Retail Sales Growth
According to NRF’s analysis, retail sales are anticipated to increase by between 2.5% and 3.5% in 2024. This projection indicates a slowdown from the sharp growth rates experienced post-pandemic but aligns closely with the 10-year average growth rate of 3.6% seen prior to the pandemic. While the overall economic growth is expected to be modest, consumer spending is projected to remain robust, supported by a gradual deceleration of inflation and continued job creation, even as unemployment rates are expected to rise slightly.
“No one can accurately forecast what surprises the next year might hold, but the foundation of the economy is relatively sturdy and still on a sustainable path,” Kleinhenz said, adding that the continuing recovery remains “highly reliant” on consumer spending. “Barring unexpected shocks, it should continue growing in 2024, although not spectacularly.”
“No one could have imagined when the COVID-19 recession ended in April 2020 that we would have experienced such a resilient expansion that is now headed toward its fifth year,” he said.
Consumer Spending and Inflation Trends
Adjusted for inflation, GDP growth is forecasted at about 2.3% year-over-year, slightly below last year’s 2.5% growth rate. Consumer spending is projected to rise approximately 2%, a slight decrease from the 2.3% growth in the previous year. Despite slower wage growth, which is expected to stabilise at around 3.5% by year’s end, and a reduction in the pace of new job creation, personal disposable income has increased by 4.1% year-over-year as of February. The report noted an 8% increase in household wealth in the last quarter of 2023, which may support consumer spending through the ‘wealth effect.’
Credit Access and Consumer Confidence
According to the NRF report, data from the Federal Reserve Bank of New York and the University of Michigan show some improvements in credit access and consumer confidence. It was noted that accessing credit has become easier than the previous year, and consumer confidence in February was the highest since July 2021.
Inflation and Interest Rates
The report highlights a significant moderation in inflation, with an expected decrease to 2.2% by the end of the year. This reduction is attributed to a mix of factors including moderation wage growth, recovery in supply chains, subdued consumer demand, and higher interest rates. Moreover, Jack Kleinhenz anticipates that the Federal Reserve might begin reducing interest rates as early as June, with potential further cuts later in the year.
Implications for Jewelers and the Jewelry Industry
For our industry, the described economic conditions indicate a stable consumer spending environment. Stability in disposable income and consumer confidence may support consumer expenditures on luxury items, including jewelry. The anticipated stability in disposable income and consumer confidence could drive continued consumer expenditure on luxury items. It’s important, however, to note the potential impacts of moderated inflation and possible interest rate reductions on consumer purchasing power.
Furthermore, the stabilisation of supply chains and the moderation in inflation could lead to more predictable costs for raw materials, which is beneficial for pricing and inventory management. Jewelers might also benefit from exploring financing options for consumers, given the improved accessibility to credit.
