Should investors be worried about an economic slowdown in 2022?

Rhe record inflation rate and the continuation of “the great resignation” in 2022 raise the question: could these factors exert downward pressure as we go through the year? In this segment of Backstage passregistered on January 14Fool.com contributors Toby Bordelon and Rachel Warren chat.

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Toby Bordelon: Speaking of markets, we have figures from the trade department. Today retail sales fell 1.9% in December, according to their latest figures here. It was worse than expected. I think they were only expecting a 0.1% drop or something. It was quite important.

One thought that was mentioned in an article I was reading about this is that higher prices, inflation might be causing the slowdown, people spending less because prices are going up.

You might also think about supply chain issues, with people spending less because they can’t get what they want to buy. Maybe it fits in. My question for you and Rachel, you can kick us off here is, what’s your opinion on this? Are you concerned about an economic downturn, do you see it as temporary? What do you think?

Rachel Warren: I thought that was interesting. I don’t think I’m worried about an economic downturn yet. I think if it’s something that’s starting to become a pattern, I might be a little more concerned.

I will say that I wasn’t terribly surprised, but I thought some of the breakdown of some of these larger spending cuts was interesting. On the one hand, you might consider it as perhaps an unavoidable downturn since the holiday season.

We know that supply chain issues persist. If you go to the store, it doesn’t matter what you buy, like I know I’ve been to Target recently there are just fewer items on the shelves. So even if you want to spend the money, sometimes the items you want just aren’t there. We know that inflation is still galloping. The stock market has been all over the place, prices for everything from meat to auto parts are at record highs.

I think those are all factors that could contribute to it. But one of the things I noticed in CNBC article that talked about this earlier was that online spending was the area where there was a biggest drop in overall spending. The article says non-store retailers reported an 8.7% drop for the month. Two other areas where there was a sharp drop in sales were furniture and home furnishings sales, which fell 5.5%.

Sporting goods, music and bookstores fell 4.3%. Then restaurants and bars 0.8%. Part of me is wondering if any of these things are likely to trim their discretionary spending a bit as we enter a new year and many of these macro factors that were very much in play in 2021 are still firmly in place?

As we enter the new year, does this cause people to step back and think before spending on an item they may not need in the immediate future?

Finally, I read some interesting comments from the chief U.S. economist at S&P Global, Beth Ann Bovino, in the New York Times. It was interesting because she said that these declines that we saw in this month’s report, she said, “That’s not a sign of consumer weakness given that households have balance sheets relatively strong with high levels of savings and a strong job market with rising wages, it seems like consumers aren’t necessarily closing their wallets. They’re taking a short break.”

It may take a break as we enter the new year, perhaps letting those resolutions kick in. I will be very interested to see the figures for next month. Don’t worry me yet. But I think we could see that continue a bit, especially since some of these variants are still circling around. We worry about inflation. Maybe people will temporarily cut discretionary spending. But you have to see.

Rachel Warren has no position in the stocks mentioned. Toby Bordelon has no position in the stocks mentioned. The Motley Fool has no position in the stocks mentioned. The Motley Fool has a disclosure policy.

The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of Nasdaq, Inc.

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