The U.S. economy has been improving over the past several months, but the key to maintaining that momentum is continuing growth of vaccination levels, the National Retail Federation chief economist said.
“Vaccination is the key to further economic recovery, reopening and rebuilding,” said NRF’s Jack Kleinhenz. “With the outlook for the global economy continuing to hinge on public health, vaccine numbers are extremely important, not just for the United States but for the whole world.”
His comments came in the August issue of NRF’s Monthly Economic Review, which noted that only 57% of the U.S. population had received at least one dose of COVID-19 vaccine as of July 27, 2021.
That percentage came as the latest Blue Chip Economic Indicators report cited uneven rollout of vaccines amid the emergence of new virus variants as the greatest threat to the economy. Faster vaccination holds the greatest opportunity for growth, the report said.
While recently increased infection rates and renewed mask mandates might have an impact on consumer behavior, the third quarter so far resembles pre-pandemic activity as the reopening of stores and the economy progresses, Kleinhenz said.
Consumers are shopping and June’s 18% year-over-year increase in retail sales included increases for department, clothing and electronics stores, all of which had seen weak sales a year ago. Back-to-school shopping, expected to be up 6% according to NRF’s annual consumer survey, will contribute to sales in those sectors.
And with a 16.4% year-over-year increase for the first six months of the year, overall retail sales are in line with NRF’s revised forecast that 2021 should grow between 10.5% and 13.5% over 2020.
“This is the fastest pace of expansion in decades, but it comes with aches and pains,” Kleinhenz said.
Also, inflation concerns driven by labor shortages and supply chain issues could see prices rise heading into the all-important holiday shopping season.
Kleinhenz said that inflation expectations “can become self-fulfilling” with workers demanding higher wages if they expect prices to rise, forcing employers to increase prices and creating a continuous cycle.
A University of Michigan survey last month found consumers expect inflation of 4.8% over the next year, the highest since a spike in oil prices in 2008, but a Federal Reserve index predicts an increase of 2.75%.
Kleinhenz feels that inflation should peak in the next few months. As supply chain and labor issues and other drivers of higher prices fade, it is unlikely inflation will persist for more than a year, he added.