U.S. inflation is at its highest level in 40 years, but it has not yet had a material impact on overall consumer spending.
Supply chain disruptions, the reopening of the economy, and energy prices account for nearly two-thirds of the current inflation. These factors should become less acute this year.
The outlook for consumer spending remains positive, although inflation is a risk that bears watching.
The composition of spending will continue to normalize as Americans unleash pent-up demand for travel, entertainment, and other social consumption. Demand growth for durable goods will slow, in part, due to higher interest rates.
Retail leasing demand will continue to improve, thanks to fundamental strength in sectors that are less sensitive to inflation, such as quick-service food, discount apparel and dollar stores.
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