The United States appears to be at the midpoint of an economic cycle that should continue to see growth even as the Federal Reserve raises interest rates to control inflation, according to National Retail Federation chief economist Jack Kleinhenz.
Just as it released the economic forecast, NRF senior vp of government relations David French issued a statement on the Ocean Shipping Reform Act being introduced in the Senate. The House of Representatives already passed its version of the measure. The bipartisan Senate legislation has Amy Klobuchar and John Thune as sponsors and would modernize the international maritime transportation system.
“The sustained supply chain challenges, exacerbated by increased consumer demand during the coronavirus pandemic, have continued to impact the daily operations of retailers and the greater business community,” French said in the statement. “For nearly two decades the Shipping Act has remained untouched, complicating supply chain disruption issues and adding to port congestion. Now more than ever, it is essential that we prioritize and invest in changes to support a modern-day transportation system. We appreciate the work of Senators Klobuchar and Thune to expedite this critical legislation and look forward to supporting its swift consideration in the Senate and conference with the House.”
On his part, Kleinhenz said, “The maturing economy remains in growth mode and there is good reason to expect it will soon approach normal trends. Despite ongoing challenges, we are clearly still in an expansion phase. The question is how long it will last as policymakers strike a delicate balance between encouraging growth and taming inflation. It is not clear how Fed policy will develop, and there will be indigestion as we adjust to new policies.”
Still, he said, both households and businesses are “in good financial shape,” COVID-19 is having less of an impact on economic activity “and there is plenty of room to raise rates without threatening the economy.”
Gross domestic product in the United States gained 5.7% in 2021 from 2020, the fastest growth for any calendar year since 1984, and household spending continued to expand in the fourth quarter even though not as quickly as earlier in the year. Kleinhenz expects GDP to grow between 3% and 4% in 2022, still faster than the 2.3% annual pace during the 2009 to 2020 expansion ended by the pandemic.
The rapid advance in economic growth has come amid the highest inflation in almost four decades, with the Consumer Price Index up 7% year-over-year as of December, the Bureau of Labor Statistics reported. In response, the Federal Reserve noted that it would raise interest rates to help bring inflation under control. Rate hikes will make mortgages, car loans and other credit products more expensive, but “households are poised to spend” anyway, Kleinhenz said, partly because of savings accumulated during the pandemic.
