NRF: 2022 to Be 'Another Very Challenging Year of Substantial Uncertainty' for Retail
A resilient consumer and no new expected pandemic shutdowns should help.
NATIONAL REPORT — Convenience store retailers can expect the COVID-19 omicron variant to cause "another very challenging year of substantial uncertainty," according to National Retail Federation (NRF) Chief Economist Jack Kleinhenz.
Remaining questions to be answered in 2022 include whether the pandemic is near its end, whether supply chain issues will be resolved, and how high inflation will go and how long it will last.
"Even with the experience of the past two years, there is no model that can predict how the economy responds to a pandemic," Kleinhenz said. "What we have learned is that each successive variant has slowed down the economy but that the degree of slowdown has been less."
Considerable uncertainty should not be mistaken for "doom and gloom" for retailers, he stressed in NRF's January Monthly Economic Review.
"While omicron is highly transmissible, its effects can be relatively mild for those who are fully vaccinated and broad-based lockdowns are not expected," the economist wrote. "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."
According to Kleinhenz, a big positive for retailers is the resilience of the U.S. consumer. Even with inflation an obstacle, consumer wealth grew 18.1 percent year over year in the third quarter of 2021 and consumers "have never been as wealthy as they are today." While government stimulus programs prompted by the pandemic are "in the rearview mirror," job growth and wage gains amid the current labor shortage are continuing 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," Kleinhenz stated. "Fortunately, we have a lot of tailwind in terms of job growth, spending and production as we turn the calendar to 2022."
Inflation, which was driven by shortages of goods as COVID-19 shut down factories and snarled supply chains while government stimulus fueled consumer spending, is likely to continue in 2022, but should eventually slow.
"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," he 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."
More about how retailers are faring will be revealed on Jan. 14, when the U.S. Census Bureau releases its December retail sales data. November sales — excluding automobile dealers, gasoline stations and restaurants — rose by 14.8 percent in November 2021 compared to the same month in 2020. Experts expect the Census Bureau to report strong foot traffic and retail sales during December.
NRF believes holiday sales during the two final months of 2021 were on track to grow as much as 11.5 percent compared to the same timeframe in 2020.
As Convenience Store News previously reported, NRF was optimistic in April 2021 "that the recovery is accelerating and that the needed rebuilding of the economy is underway" after a very difficult 2020.