The May edition of the NRF’s Monthly Economic Review revealed the US economy’s gross domestic product grew only 1.6% in the first three months of this year (Q1), which is less than half the 3.4% seen in Q4 of 2023 and the lowest level since 2.1% in the second quarter of last year.

The NRF’s chief economist Jack Kleinhenz explained that during Q1 the US economy’s growth slowed, but consumers are still spending more than last year.

He added: “Even with signs that the economic expansion is decelerating, the economy remains resilient, boosted by a solid job market and continued spending by consumers and businesses.”

Kleinhenz also noted that progress has been made on inflation since its 2022 peak but it is lingering for longer than expected.

The Personal Consumption Expenditures Price Index followed by the Federal Reserve showed year-over-year inflation, which is driven largely by prices for services, rose to 3.4% during Q1 compared to 1.8% in the previous quarter.

The NRF highlighted that consumers remain willing to spend on both goods and services despite ongoing cost pressures.

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It explained consumer spending growth fell from 3.3% in Q4 but still grew 2.5% year over year in Q1. And total retail sales as reported by the US Census Bureau were stronger than expected in March, rising 4% year over year compared with 2.1% in February.

The NRF believes the economic data “paints a picture that the overall US economy remains in very good shape” driven by a strong labour market, “solid” job growth and rising wages.

It pointed out that although wage gains have supported workers’ ability and willingness to spend, it is unwelcome news for Fed officials trying to contain inflation pressure.

The Fed left interest rates unchanged last week due to high inflation and the NRF suggested that a rate reduction that might have come in June is now likely to be delayed.

“With the labour market still rebalancing, economic growth still steady and financial conditions easy, we expect the Fed will likely push out the decision on easing of interest rates for some time yet,” Kleinhenz said.

Last month (April) Kleinhenz said he believed the US economy would remain steady this year despite a slowdown in both gross domestic product (GDP) and retail sales growth.