Table of Contents
WASHINGTON – The strong economic momentum of 2024 is expected to continue shaping growth in 2025, but uncertainty looms as policymakers in Washington debate key economic policies, National Retail Federation Chief Economist Jack Kleinhenz said today.
“While the U.S. economy has entered 2025 with a fair amount of momentum, the mix of policies being debated on immigration, tariffs, deregulation, and taxes blur the economic outlook,” Kleinhenz said. “Deregulation and tax cuts could provide positive momentum, but immigration restrictions and tariffs could act as a drag on the economy.”
Kleinhenz expressed concerns that uncertainty over government policies could hinder business operations, potentially affecting consumer spending and corporate investment.
His remarks, published in NRF’s March Monthly Economic Review, highlighted strong economic performance in 2024. Inflation-adjusted gross domestic product (GDP) grew 2.8%, and consumer spending increased 2.8% yearly. Core retail sales, excluding auto dealers, gas stations, and restaurants, increased 3.6%.
Despite a post-holiday dip in January retail sales, which declined 0.9% from December, year-over-year growth remained solid at 4.2%, reinforcing the strength of consumer fundamentals.
Job and wage growth have significantly contributed to consumer spending, bolstered by a tight labor market. Although job additions decreased in January to 143,000 from December's 207,000, the unemployment rate has dropped to 4%.
However, inflation remains a concern, rising to 3% in January from 2.9% in December, with producer prices up 3.5%. Given the hotter-than-expected inflation data, the Federal Reserve is unlikely to cut interest rates soon.
Consumer sentiment has also weakened, with the University of Michigan’s Index of Consumer Sentiment falling to 64.7 in February from 71.7 in January. Inflation expectations among consumers increased to 4.3%, the highest since November 2023, potentially reflecting concerns over tariff-induced price increases.
As the voice of the retail industry, NRF continues to monitor economic conditions through reports like the Monthly Economic Review, providing insights on trends impacting businesses and consumers alike.
