Home NRF: Conflicting Data Complicates Recession Determination
September 6, 2022
NRF: Conflicting Data Complicates Recession Determination
NRF Upgrades 2021 Retail Forecast After Strong First Half

By Mike Duff

Contributing Editor

Economic growth in the United States has slowed, but it still isn’t clear if the nation is in a recession, National Retail Federation chief economist Jack Kleinhenz asserted in a monthly NRF review.

The emergence of conflicting data on whether the U.S. economy grew or shrank during the first half of the year makes a determination about recession challenging, Kleinhenz maintained, and headwinds with roots in the COVID-19 pandemic, such as inflation, Federal Reserve interest rate hikes and a rocky stock market, create a complex combination of trends.

Gross domestic product fell by 1.6% year over year in the first quarter and another 0.6% in the second quarter, according to the U.S. Bureau of Economic Analysis. Although not the official definition, two consecutive quarterly GDP declines typically signal a recession. But a less-publicized measure of the economy, gross domestic income, grew 1.8% in the first quarter and 1.4% in the second quarter, providing a sharp contrast to the decline in GDP. Both numbers should be identical theoretically, but GDI reports come out about a month later than those on GDP in order to include more recent and more detailed data including profits from all corporations.

In addition to differences in GDP and GDI, consumption spending gained a revised 1.5% in the second quarter, significantly better than the initial report of 1%, NRF pointed out. And, although the Census Bureau reported that overall July retail sales didn’t grow versus June, NRF’s calculation, which excludes automobile dealers, gasoline stations and restaurants, indicated that core retail sales were up 0.8% monthly, and both calculations advanced year over year.

“Since there is a large difference between estimates of GDP and GDI, did the economy expand in the first half of 2022 or did it contract?” Kleinhenz asked. “That is difficult to determine, but we will likely have a better idea at the end of September.”

In addition, Kleinhenz noted, “As we come to the end of the summer, economic indicators are signaling an unsteady U.S. expansion in the face of several headwinds. These factors are all contributing to the debate on whether the economy is already in a recession, but key indicators disagree on whether we are there yet.”

Observers are focused on the consumer in determining how the economy is performing now and what may develop, and they are looking at retail as an indicator.

“While consumers have become more cautious and cooled their spending in the first half of 2022,” Kleinhenz said, “households continue to spend and are contending with inflation by using credit cards more, saving less and drawing on savings built up during the pandemic. Consumer stamina will be the big question going forward.”

On September 29, the BEA plans to release its annual update of National Economic Accounts. The National Bureau of Economic Research officially determines if the country is in a recession, and it looks at both GDP and GDI along with job gains, personal income, industrial production, hours worked and business and retail sales to do so, NRF stated.

The NBER has yet to make a determination about whether the economy is in recession, a spokesperson for the organization confirmed.

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