Monthly Economic Review: September 2016

If consumers spend, the economy will stay on track to grow
Monthly Economic Review: September 2016

The recent performance of the U.S. economy has operated in fits and starts. A handful of recently released indicators — including industrial production, retail sales, hiring and inflation — have not been robust, thereby decreasing optimism in economic growth ramping up in the latter half of the year. In contrast, the National Retail Federation remains cautiously optimistic that the pace of economic activity will pick up in the near term.

Data is often uneven and erratic due to small shocks in marketplace activity, seasonal changes, revisions and other factors. Month-to-month comparisons can provide false signals about the direction and pace of economic activity. Moreover, the slow economic recovery has made it even more difficult to detect strong or weak signals, making it critical not to overly interpret blips. Trends and implications are better understood by piecing together several monthly releases of data to identify good or poor patterns of performance. This is particularly true today, as current economic activity remains unimpressive and there is little momentum to move beyond a general economy growing at a rate of about 2 percent annually.

Economic activity is not expected to grow at a spectacular pace, but NRF sees a bit more room for growth generated from stronger domestic demand. Although the unemployment rate has changed slightly, the labor market has strengthened with solid job gains. Household-related spending is expected to remain sound. Assistance in economic improvements is expected from commercial construction and should provide a basis for growth by adding jobs, income and spending. Meanwhile, many firms have reduced the overhang of manufactured goods inventories from earlier in the year and now will need to boost production, which will add to jobs, income and spending. 

There are several risks to NRF's outlook including geopolitical uncertainty, slower global growth, the presidential election, the strong dollar, low oil prices and tight financial conditions. In general, consumer behavior continues to reflect a fairly rational and cautious tone by historical standards, yet the recent story about economic growth is all about robust consumer spending. American consumers are resilient and their spending power should never be underestimated. As long as consumers remain confident and continue to spend, the economy will stay on track to grow.  

Download this month’s report, which includes the following charts and highlights:

  • Consumer Sentiment
  • Retail Sales
  • Job Growth
  • Retail Employment
  • GDP
  • Housing Market
  • Income
  • Economy