The Covid-19 omicron variant will bring insecurity to the economy in 2022 and could contribute to inflation, but is unlikely to cause widespread shutdowns or slowdowns, National Retail Federation Chief Economist Jack Kleinhenz said in the NRF’s January edition of its Monthly Economic Review, which was released today.

“Even with the experience of the past two years, there is no model that can predict how the economy responds to a pandemic,” Kleinhenz said. “What we have learned is that each successive variant has slowed down the economy but that the degree of slowdown has been less.”

“While omicron is highly transmissible, its effects can be relatively mild for those who are fully vaccinated and broad-based lockdowns are not expected,” Kleinhenz said. “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. That would put further pressure on inflation since supply chains are already overloaded across the globe.”

The report added that 2022 is likely to be “another very challenging year of substantial uncertainty” and that questions to be answered include whether the pandemic is near its end, whether supply chain issues will be resolved, how high inflation will go and how long it will last.

Retailers now await next week’s release of the Census Bureau’s December retail sales data, which will complete the official total for sales during the 2021 holiday season. November sales – excluding automobile dealers, gasoline stations and restaurants – were up 14.8 percent year over year, and NRF believes holiday sales during the two months were on track to grow as much as 11.5 percent over 2020.

Inflation, which was driven by shortages of goods as Covid-19 shut down factories and snarled supply chains while government stimulus fueled consumer spending, is likely to continue in 2022, but should eventually slow.

“Inflation started gradually and then came on strong, but clearly heated up during 2021 and has become a formidable factor facing the economy and especially consumers,” Kleinhenz said. “What is ironic is that the monetary and fiscal policy that pulled the economy out of the recession has prompted unprecedented growth that is now undermined by accelerating prices.”