The nation is at a “critical moment” of waiting to see what will happen next according to a new report from the National Retail Federation (NRF). 

New data from the July issue of the NRF’s Monthly Economic Review points to a drop in gross domestic product year-over-year from 3.4 percent in the fourth quarter of 2023 to 1.4 percent in the first quarter of 2024. This is the lowest point since the spring of 2022, according to the NRF, which has contributed to the deceleration of consumer activity due to higher interest rates. Meanwhile, unemployment remained steady, hovering around 4.0 percent. 

“Today we’re waiting once again,” said National Retail Federation chief economist Jack Kleinhenz, adding the current economic climate strongly mirrors that of 2017 which saw fast economic growth and low unemployment. “Much like 2017, the economy is going strong, and the labor market is still relatively tight. But this time we’re waiting for inflation to come down, and we’re also waiting for the Federal Reserve to decide on when to lower interest rates.”

Kleinhenz said that the Fed must balance using high interest rates to reduce inflation with the risk that keeping rates too high for too long could slow the economy to the point of recession.

“We’re at a critical moment as consumers, businesses, investors, and others wait to learn how they will need to adjust their plans for future economic conditions,” Kleinhenz said. “Fortunately, the risks for monetary policy look balanced at the moment.”

According to the NRF, year-over-year inflation as measured by the Personal Consumption Expenditures Price Index dropped from 3.4 percent in the first quarter to 2.6 percent in May. This level of inflation was sparked by the price of services, which was up 3.9 percent in May, while prices for goods were down 0.1 percent.

“The Fed likely welcomed data that showed household income, spending, and saving were all healthy in May, demonstrating that the economy is growing at a slower-but-steady pace,” Kleinhenz said. “The U.S. economy looks resilient enough for the Fed to wait and has afforded the Fed time to do so.”

Disposable income remained steady at 3.7 percent, while personal consumption was up 5.1 percent. Kleinhenz said this “continues to display resilience” and has driven income growth ahead of inflation.