Adjusted for inflation as measured by the CPI, consumer spending has been weak most of the year.
The above chart shows the monthly change in retail sales minus the monthly change in the CPI.
Other than a surge in January half of which is a seasonal adjustment rebound from a weak December, sales have mostly floundered in real terms.
Advance Retail Sales
- Advance estimates of U.S. retail and food services sales for June 2023, adjusted for seasonal variation and holiday and trading-day differences, but not for price changes, were $689.5 billion, up 0.2 percent (±0.5 percent) from the previous month, and up 1.5 percent (±0.7 percent) above June 2022.
- The April 2023 to May 2023 percent change was revised from up 0.3 percent (±0.5 percent) to up 0.5
- Retail trade sales were up 0.2 percent (±0.5 percent) from May 2023, and up 0.5 percent (±0.5 percent) above last year.
- Nonstore retailers were up 9.4 percent (±1.6 percent) from last year, while food services and drinking places were up 8.4 percent (±2.3 percent) from June 2022.
The key phrase is adjusted for seasonal variation and holiday and trading-day differences, but not for price changes.
The commerce department does not factor in inflation. My chart does.
Inflation Adjusted Retail Sales Last Eight Months
- November: -1.5 Percent
- December: -0.8 Percent
- January: +2.3 Percent
- February: -1.1 Percent
- March: -1.0 Percent
- April: + 0.0 Percent
- May: +0.4 Percent
- June: +0.0 Percent
Retail Sales adjusted for inflation have only been above zero twice in the past eight months.
Real vs Nominal Retail Sales Since 1992
Real vs Nominal Retail Sales Percent Change From Year Ago
Adjusted for inflation, retail sales are down from a year ago for five consecutive months and seven of the last eight.
The consumer is definitely weakening as rate hikes and inflation take a toll.
A 5 Percent Pay Cut is Coming for 37 Million Student Loan Borrowers
Bear in mind that effectively a A 5 Percent Pay Cut is Coming for 37 Million Student Loan Borrowers
The return of student loan payments will put a crimp on retail spending for millions of borrowers.
These are really Goldilocks numbers , not low enough to cause recession and not high enough to cause inflation. Stock and bond markets seem to agree.
Contrary to Nobel Prize–winning economist Milton Friedman and Anna J. Schwartz’s “ A Monetary History of the United States, 1867–1960, “there is no “Fool in the Shower”.
Monetary lags are not “long and variable”. The distributed lag effects for both #1 real output and #2 inflation have been mathematical constants > 100 years.
The distributed lag effect for the real output of goods and services is near zero, but not yet negative. Unless we see further contraction, the projection is that there will be no recession for the rest of the year.
I think we’re already in an unofficial recession. Whether or not what we’re in is ever recognized depends on how many adjustments government statisticians are willing to do before losing all credibility.
By my #s, the rate-of-change has to fall below zero to cause a “recession”. And we are close to that figure.
My AD proxy for R-gDp has the same problem as John Mauldin’s blog tracking inflation (the base effect).
The thing that looks really bad is tax receipts dropped 9% in June YOY. I don’t see any way that can be explained outside of people making a lot less. When you look at unadjusted payroll numbers, they’re terrible. Then they get adjusted to look much better.
The unemployment rate is unusually low. Too low to be believable. My understanding is you’re not counted as being unemployed unless you regularly mail out resumes. Who does that? I suspect the number of unemployed is much higher than the data shows.
Capital gains.
You need to send a resume, have an interview, or meet with an employment counselor
Capital gains wouldn’t be withheld in June.
You won’t get an interview if your resume doesn’t align with openings and I don’t know what to make of meeting with an employment counselor. If it’s something you have to pay for, doubt unemployed people are paying for it.
Credibility, like manners, got left behind with the 20th century.
That was my feeling too.
I have seen little evidence, in over twenty years, that Government agencies are seriously concerned about their credibility. Perhaps I should have written no evidence.
As the economy evaporates into inflationary depression, the prices must soar higher to make up for the lack of sales and eventually production. It will soon require a trillion new ‘printed’ money PER DAY just to maintain the current feudal system.
Link: Dr. Daniel L. Thornton, May 12, 2022:
“However, on March 26, 2020, the Board of Governors reduced the reserve requirement on checkable deposits to zero. This action ended the Fed’s ability to control M1.”
I.e., as Dr. Richard Anderson said: “Legal reserves are driven by payments”.
Shadowstats corroborates this: The extraordinary flight to liquidity in “Basic M1” (Currency plus Demand Deposits [checking accounts]) continued in December 2022, at a 52-year high, providing the driving force behind the monetary-based inflation.
All deposits are created ex-nihilo by the Reserve and commercial banks. So, all monetary savings, income not spent, originate within the confines of the payment’s system. The source of interest-bearing deposits is non-interest-bearing deposits. DDs are just shifted into TDs within the system.
Unless monetary savings are expeditiously activated by their owners, saver-holders, a dampening economic environment is fostered, i.e., secular stagnation. In the current situation, we have the opposite scenario.
In other words, time deposits are being activated, increasing money velocity, e.g.,
link to fred.stlouisfed.org
“The GDPNow model estimate for real GDP growth (seasonally adjusted annual rate) in the second quarter of 2023 is 2.3 percent on July 10, up from 2.1 percent on July 6.”
I can borrow against my TDs creating even more bogus money to deposit into my DDs.
Nice. Flat spend is ideal. Did you catch John Mauldin’s blog this weekend? With 0.25% MTM price inflation, he has 4% inflation at year end because the second half of 2022 was pretty flat for price increases. If inflation is to stay under 4%, we need zero price increases. What are your thoughts about businesses holding the line on prices or demand softening enough for price decreases?
re: “we need zero price increases” We need zero money growth for a long period of time to combat inflation.
If businesses have to cut prices to sell things and raw materials and/or production costs are up or flat, then logically profits will take a hit.
The 12 month increase in the Producer Price Index is 0.1%. Input costs are not going up.
They can reduce quality sufficiently to maintain profits.
Everything depends on labor costs which are the primary driver of inflation at the moment since the services sector is where the largest increases in prices are happening.
I suspect businesses won’t be able to hold the line on wage increases.
After hold that line comes block that kick.
No Recession – Jobs.
Bull Market.
Strongest economy in US history.
War is great for the global economy.
How do you like them Bidenomics?
Ah, the best of all possible worlds.
See Theodicy, rhymes with Idiocy.