Washington, D.C. – The U.S. economy entered 2025 with strong momentum, but policy decisions from the White House and Congress are casting uncertainty over future growth, according to National Retail Federation (NRF) Chief Economist Jack Kleinhenz.
“While the U.S. economy has started the year on solid footing, ongoing debates on immigration, tariffs, deregulation, and taxes are creating mixed signals about the economic outlook,” said Kleinhenz.
Policy Crosscurrents and Economic Risks
Deregulation and tax cuts could boost economic momentum, while immigration restrictions and tariffs may hinder growth and create economic drag. Kleinhenz warned that uncertainty surrounding government policies could impact business operations, slow consumer spending, and complicate investment and hiring decisions.
“Although recent economic data remains strong, we are watching carefully for downside risks,” he added.
Retail and Consumer Spending Trends
NRF’s March Monthly Economic Review reported 2.8% GDP growth in 2024, driven by strong consumer spending. Core retail sales—excluding autos, gasoline, and restaurants—rose 3.6% year over year. In January 2025, retail sales declined 0.9% from December but showed a 4.2% year-over-year increase, signaling that consumer fundamentals remain stable.
Job and wage growth have supported spending, with 143,000 jobs added in January and the unemployment rate dropping to 4%. However, inflation rose more than expected in January, with the Consumer Price Index up 3% year over year and producer prices increasing by 3.5%.
Inflation and Interest Rate Uncertainty
Kleinhenz noted that rising inflation trends could delay Federal Reserve interest rate cuts. Consumer sentiment also declined, with the University of Michigan’s Index of Consumer Sentiment falling to 64.7 in February from 71.7 in January. Consumers now expect inflation to rise to 4.3% this year, up from 3.3% in January, possibly reflecting concerns about tariff-related price increases.
Looking Ahead
Kleinhenz emphasized that the economic trajectory will depend on how and when key policies are implemented. As businesses and consumers navigate these uncertainties, the NRF continues to monitor trends shaping retail and economic growth in 2025.
