The U.S. economy is at a “critical moment,” according to National Retail Federation Chief Economist Jack Kleinhenz. As inflation eases, attention turns to the Federal Reserve’s decisions on interest rates. While the labor market remains strong, current inflation levels are prompting careful consideration. Year-over-year GDP growth fell from 3.4% in Q4 2023 to 1.4% in Q1 2024, attributed largely to reduced consumer activity—a key aim of higher interest rates.
Inflation measured by the Personal Consumption Expenditures Price Index decreased from 3.4% to 2.6% from Q1 to May 2024, with service prices rising while goods prices fell. Despite concerns over high prices, consumer sentiment remains optimistic about continued inflation moderation. The Fed has room to wait as household income, spending, and saving rates show resilience, indicating a slower but steady economic growth. Monthly job gains are robust, supporting overall income growth. NRF continues to monitor these developments closely through its Monthly Economic Review.
