Should Investors Be Worried About An Economic Slowdown in 2022?

Record-high inflation and "The Great Resignation" continuing in 2022 beg the question: Could these factors exert downward pressure as we get further into the year? In this segment of Backstage Pass, recorded on Jan. 14, Fool.com contributors Toby Bordelon and Rachel Warren discuss. 

Toby Bordelon: Speaking of markets, we got some figures from the commerce department. Today retail sales dropped 1.9% in December, according to their latest numbers here. That was worse than expected. I think they were only expecting like 0.1% drop or something like that. This was fairly significant.

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

Perhaps other thing you might think about is supply chain issues, people spending less because they can't get what they want to buy. Maybe that's getting into it. My question for both you and Rachel, you can kick us off here is, what's your take on this? Are you concerned about an economic slowdown, do you see this as temporary? What do you think?

Rachel Warren: I thought this was interesting. I don't think I'm worried about an economic slowdown yet. I think if this is something that starts to become a pattern I might be a little more concerned.

I will say I wasn't super surprised, but I thought some of the breakdown of where some of these biggest declines in spending were was interesting. On the one hand you could look at it as maybe this was something of a slowdown that was inevitable from the holiday season.

We know that supply chain issues are ongoing. If you go to the store, whatever you're shopping for, like I know I went to Target recently, there are just less items on the shelves. So even if you want to spend money, sometimes the items you might want just aren't there. We know inflation is still rampant. The stock market has been all over the place, prices for everything from meat to car parts are at record highs.

I think that these are all factors that could be contributing. But one of the things I noticed in the CNBC article that was talking about this earlier was that online spending was the area where there was a biggest decline in overall spending. The article said that non-store retailers reported a plunge of 8.7% for the month. Two other areas where there was a big decline in sales was furniture and home furnishing sales, which were down 5.5%.

Sporting goods, music, and bookstore saw a 4.3% drop. Then restaurants and bars 0.8%. Part of me wonders, are some of these items people may be scaling back a little bit on their discretionary spending as we enter a new year and a lot of these macroeconomic factors that were very much at play in 2021 are still very much in place?

As we enter the new year, is that causing people to maybe take a step back and think before spending on an item that perhaps they don't need in the immediate future?

One final note was I saw some interesting commentary 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, "This is not a sign of consumer weakness given that households have relatively strong balance sheets with high savings levels and a strong job market with wages climbing higher, it seems that consumers are not necessarily closing their pocketbooks. They're taking a brief pause."

It could be that it's taking a pause as we enter the new year, maybe letting those resolutions kick in. I will be very interested to see next month's numbers. Doesn't worry me yet. But I do think we might see a little bit of that continue, especially as some of these variants are still circling around. There's concern about inflation. Maybe people are going to cut back on their discretionary spending temporarily. But we have to see.