American Retail Spending Could Raise Inflation as COVID Outbreak Leads to Less Dining Out

Beautiful woman shopping onlain using smartphone and debit card.
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Consumers, you have been warned: If you want to do your part to help tame inflationary costs to the economy, spend more of your money heading out to restaurants or nightclubs and less sitting at home ordering goods off the internet. That’s one of the messages from National Retail Federation Chief Economist Jack Kleinhenz as the United States tries to come to grips with the omicron variant.

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In a Wednesday press release, Kleinhenz said that “each successive variant has slowed down the economy,” but that the degree of the slowdown has been progressively less impactful.

“While Omicron is highly transmissible, its effects can be relatively mild for those who are fully vaccinated and broad-based lockdowns are not expected,” Kleinhenz said. “Little is certain about omicron’s impact on consumer demand, but people who stay at home because of the variant are more likely to spend their money on retail goods rather than services like dining out or in-person entertainment. That would put further pressure on inflation since supply chains are already overloaded across the globe.”

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Dining out or attending entertainment events have less impact on the supply chain than retail spending because fewer goods from fewer locations are involved. The reason this is important is because global supply chain disruptions have been a major contributor to runaway inflation, leading to a shortage of goods and driving prices higher.

“Inflation started gradually and then came on strong, but clearly heated up during 2021 and has become a formidable factor facing the economy and especially consumers,” Kleinhenz said. “What is ironic is that the monetary and fiscal policy that pulled the economy out of the recession has prompted unprecedented growth that is now undermined by accelerating prices.”

His remarks were included in the January issue of NRF’s Monthly Economic Review, which warned that 2022 is likely to be “another very challenging year of substantial uncertainty.” That uncertainty mainly centers on how much longer the pandemic will last, whether and when supply chain issues will be fixed, how high inflation will go and how long it will last.

The NRF report comes ahead of next week’s release of the Census Bureau’s December retail sales data, which will complete the official tally for holiday sales. The picture so far has been positive. As the NRF noted, November sales excluding car dealers, gas stations and restaurants rose nearly 15% from the previous year. According to NRF calculations, holiday sales during November and December were on track to grow as much as 11.5% over 2020, before the pandemic hit.

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Despite high inflation — which has been running at more than 6% in recent months — the nation’s consumer wealth grew 18.1% during last year’s third quarter, the NRF said. Kleinhenz attributes much of the gain to job growth and wage gains, which continue to drive consumer income and spending.

“If there is one lesson we have learned, it is not to underestimate the resilience of the consumer and, therefore, the U.S. economy,” he said. “Fortunately, we have a lot of tailwind in terms of job growth, spending and production as we turn the calendar to 2022.”

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About the Author

Vance Cariaga is a London-based writer, editor and journalist who previously held staff positions at Investor’s Business Daily, The Charlotte Business Journal and The Charlotte Observer. His work also appeared in Charlotte Magazine, Street & Smith’s Sports Business Journal and Business North Carolina magazine. He holds a B.A. in English from Appalachian State University and studied journalism at the University of South Carolina. His reporting earned awards from the North Carolina Press Association, the Green Eyeshade Awards and AlterNet. In addition to journalism, he has worked in banking, accounting and restaurant management. A native of North Carolina who also writes fiction, Vance’s short story, “Saint Christopher,” placed second in the 2019 Writer’s Digest Short Short Story Competition. Two of his short stories appear in With One Eye on the Cows, an anthology published by Ad Hoc Fiction in 2019. His debut novel, Voodoo Hideaway, was published in 2021 by Atmosphere Press.
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