Despite the challenges of high interest rates and inflation, consumer spending continues to show resilience in the U.S. economy, according to National Retail Federation Chief Economist Jack Kleinhenz. In Q1 2024, while GDP growth decreased from 3.4% in Q4 2023 to 1.6%, consumers still spent more compared to a year ago.

Kleinhenz noted that despite inflation’s slowdown in economic expansion, indicators like a strong job market and ongoing spending by consumers and businesses are keeping the economy resilient. The NRF’s Monthly Economic Review reported that consumer spending growth in Q1 decreased from 3.3% in Q4 but still showed a year-over-year increase of 2.5%.

In March, total retail sales exceeded expectations, rising by 4% year-over-year according to the U.S. Census Bureau. Kleinhenz attributed this strong spending growth to a robust labor market with solid job growth and rising wages. In March, there was a significant increase in job openings, with the three-month average payroll gain reaching its fastest pace in a year at 276,000.

In April, non-farm payrolls rose by only 175,000, falling short of estimates at 240,000. The unemployment rate increased slightly to 3.9%. Despite this setback, sectors like healthcare, social assistance, transportation and warehousing showed job gains due to consumer spending and a strong labor market’s impact on the U.S economy’s overall health remains good shape