Omicron variant likely to fuel inflation, as Americans keep shopping rather than dining out and traveling, retail trade group economist says
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The spread of the highly infectious omicron variant is likely to fuel more inflation, as Americans keep shopping instead of spending more outside of the home, according to the National Retail Federation’s chief economist Jack Kleinhenz.
The major retail trade group’s advisor said Wednesday in a news release, however, that he does not expect the latest wave of Covid cases to prompt an economic slowdown or a shutdown of businesses.
“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,” he said in the news release. “That would put further pressure on inflation since supply chains are already overloaded across the globe.”
He said that “each successive variant has slowed down the economy but that the degree of slowdown has been less.” And, he added, consumers may have more confidence to spend because of being fully vaccinated or hearing about milder cases from the variant.
Covid cases in the U.S. hit a pandemic record of more than 1 million new infections on Monday, according to data compiled by Johns Hopkins University. The country is now reporting a seven-day average of more than 480,000 new infections, nearly double the week prior, according to a CNBC analysis of Hopkins data.
The spike in coronavirus cases has prompted retailers and restaurants including Starbucks, Apple, Nike and Gap-owned Athleta to shut stores or shorten hours, as they cope with short staffing or step up sanitizing. Walmart temporarily shut nearly 60 U.S. stores in coronavirus hotspots last month to sanitize them. Macy’s said Tuesday that it is reducing store hours for the rest of the month.
However, many of those same stores have made it easier for customers to shop in other ways — from home delivery to curbside pickup.
The National Retail Federation does not expect the pandemic to hurt holiday sales either. It predicted that sales in November and December would rise between 8.5% and 10.5% compared with a year ago and reach an all-time record total of between $843.4 billion and $859 billion of sales.
Kleinhenz later boosted that forecast, saying in early December that holiday sales could rise by as much as 11.5% compared with the year-ago period.
The trade group expects to report the official holiday sales total next week, after the Census Bureau shares December retail sales data.