After the quick free fall that came with the first COVID-19 lockdowns and the strong bounceback last year, the economy is set to moderate in 2022.
But even if that’s something like a return to normal — whatever that may be nearly two years into the pandemic — retailers aren’t keen to return to slower growth.
Fashion saw a big boost last year with consumer spending that was fueled by government stimulus, pent-up demand and a stay-at-home mentality. But while Omicron might keep shoppers closer to home for a while, the stimulus has run out and consumers are expected to take a step back after the holiday rush.
The Conference Board is looking for consumer spending growth to slow to 2.5 percent in the first quarter, a deceleration from the 6.5 percent seen for the fourth quarter.
And that could be the trend for the year — a settling in of the economy as the world works through the pandemic. The slowdown is coming at a bad time for retailers, which are also still struggling with COVID-19 supply chain back-ups that could cut into profit margins just as top-line growth slips.
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IHS Markit is looking for U.S. gross domestic product growth to downshift from 5.7 percent growth last year to 4.3 percent in 2022. That’s still way above the pre-pandemic trend and a welcome return to growth after 2020’s 3.4 percent drop, but slower growth is still slower growth in a mixed-up world.
“Shipping disruptions, supply stickiness and energy price increases will continue to exert upward pressures on prices in the first half of 2022,” IHS said in its forecast. “Logistics bottlenecks will only be resolved later in the year, as demand for goods moderates and traffic normalizes, while increases in oil production and natural gas production alleviate pressures from energy prices. Wages will respond temporarily to labor market pressures in the U.S. and Europe with little-lasting effect on inflation. Year-over-year inflation rates will thus slow by the end of 2022.”
Inflation, which hit a 39-year high in November, will be front and center for the economic crowd this year, even if over the longer run prices are relatively in check for apparel.
That’s because shoppers have to put gas in the car and food on the table and then only afterward look to refresh their closets.
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