How Much Has Inflation And Free-Money Goosed Consumer Spending?
Authored by Mike Shedlock via MishTalk.com,
Retail sales came in on the hot side in April. But how much of that is inflation?
Retail Sales from Commerce Department, chart by Mish
[ZH: Zoomed in chart, courtesy of @andreasSteno]
Earlier this week I noted Retail Sales Easily Beat Expectations, US Treasury Yields Jump in Response
Here’s a key point that I mention every month: “Retail sales are adjusted for seasonal variation and holiday and trading-day differences, but not for price changes.“
This month the CPI rose by 0.3 percent but sales rose by 0.9%. So even taking inflation into consideration, sales were on the hot side.
Real Advance Retail Sales
Retail Sales from Commerce Department, chart by Mish
That’s the chart that shows the true economic picture. It’s “real” (inflation adjusted) sales that will drive GDP estimates.
Amazing Demand Recovery
The demand recovery following the 2020 Covid recession is unprecedented.
Consumer spending is well above the preceding trendline and that is fueling inflation. But what fueled spending?
Retail Sales from Commerce Department, chart by Mish
Retail spending did not cool after those rounds of free money in either nominal or real terms.
The above chart is nominal data, not inflation-adjusted but it explains big piece of inflation.
Explaining Inflation
-
The three “free money” Covid stimulus jumps in April of 2020, January of 2021 and March of 2021 led to jumps in consumer spending.
-
Eviction moratoriums also padded consumer pockets
-
Huge leaps in the number of SNAP (food stamp participants) freed up money for other goods
-
Supply chain disruptions
-
The war in Ukraine
CPI
CPI Data Courtesy of BLS
President Biden likes to blame Putin but the story does not wash. Putin invaded Ukraine in February of 2022.
Prices were already soaring. And the Fed ignored inflation every step of the way. It kept QE running all the way to March 2022!
QE goosed the stock market and that boosted demand for cars and second homes.
“In reality, it was all the free money, eviction moratoriums, increased participants on SNAP & a stock market boom, now fading”
25% increase in food stamps was executive ordered into existence starting 10/1/21 & credit card spending growing at record rate https://t.co/KlCyFGdFI1
— Danielle DiMartino Booth (@DiMartinoBooth) May 17, 2022
The Fed is Incompetent
as he as proven repeatedly.
— bill fleckenstein (@fleckcap) May 17, 2022
Markets Brain Dead
Markets brain dead? https://t.co/NKfRd56rs2
— Danielle DiMartino Booth (@DiMartinoBooth) May 17, 2022
Brain Dead Fed + QE + Unwarranted Stimulus + Supply Chain Disruption = Inflation
But no one could possibly have seen this coming (especially the Fed which kept QE running all the way to its first rate hike).
Biden Doing Everything Possible to Drive Up the Price of Oil, Some of It’s Illegal
Meanwhile Biden Doing Everything Possible to Drive Up the Price of Oil, Some of It’s Illegal
Biden also has big push for unions which will add to inflation, a big push for clean energy which will add to inflation, and of big push for student debt cancellation which would hugely add to inflation.
Powell on De-Globalization
📣 MARKET IMPACT
Fed’s Powell: There is real possibility that globalization will go into reverse to some extenthttps://t.co/v3bMYIaJg9 #OOTT— Energy EXCH (@EnergyEXCH) May 17, 2022
De-Globalization: New Supply Chains Are Inefficient and Will Drive Up Inflation
Finally, please recall my April 4, 2022 post New Supply Chains Are Inefficient and Will Drive Up Inflation
De-globalization is underway. A key ramification is higher inflation.
Other than all of the above, things are very rosy.
* * *
