Retail Sales Look Strong But Fail to Keep Up With Soaring Inflation

July 15, 2022

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4:50 pm

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20 comments

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Economics

*Nominal retail sales from commerce department, real (inflation-adjusted) sales by Mish.*

The Census Department reports Advance Retail Sales rose 1.0 percent in June.

Advance Estimates of U.S. Retail and Food Services Advance estimates of U.S. retail and food services sales for June 2022, adjusted for seasonal variation and holiday and trading-day differences, but not for price changes, were $680.6 billion.

Sales increased of 1.0 percent from the previous month, and 8.4 percent above June 2021.
Total sales for the April 2022 through June 2022 period were up 8.1 percent from the same period a year ago.
The April 2022 to May 2022 percent change was revised from down 0.3 percent to down 0.1 percent.
Retail trade sales were up 1.0 percent from May 2022, and up 7.7 percent above last year.
Gasoline stations were up 49.1 percent from June 2021.
Food services and drinking places were up 13.4 percent from last year.

Real vs Nominal Retail Sales Detail

Chart Notes

Real retail sales peaked 15 months ago in March of 2021.
That’s when the third and most irresponsible round of fiscal stimulus free money checks were sent.
Since March of 2021, nominal sales are up 8.8 percent.
Since March of 2021, real sales are down 2.4 percent.

Advance Retail Sales Month-Over-Month Details Part 1

Advance Retail Sales Month-Over-Month Details Part 2

Advance Retail Sales Month-Over-Month Details

Total: 1.0%
Gas Stations: 3.6%
Nonstore: 2.2%
Motor Vehicles: 0.8%
Food Service: 1.0%
Department Stores: -2.6%
General Merchandise: -0.2%
Excluding Motor Vehicles: 1.0%
Excluding Motor Vehicles and Gas: 0.7%

CPI Month-Over-Month

Comparisons

The CPI rose 1.3 percent in June.
Gasoline sales rose 3.6 percent and nonstore sales (think Amazon) rose 2.2 percent.
Gasoline and nonstore sales were the only advance sales categories to rise more than the CPI.

Gasoline is hardly surprising.

Nonstore offsets a department store decline of 2.2% and a general merchandise decline of 0.2 percent.

The nonstore rise may also be related to consumers avoiding driving whenever possible.

Consumer Price Index Jumps Another 1.3 Percent, Much More Than Than Expected

For more on the CPI, please see Consumer Price Index Jumps Another 1.3 Percent, Much More Than Than Expected

And No Matter What’s in Your Food Basket, the Price Keeps Rising Fast

Finally, A Big Housing Bust is the Key to Understanding This Recession

This post originated at MishTalk.Com.

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JRM

3 years ago

I believe if they want to give a realist economic indicator they need to stop comparing to sales from the COVID shutdown period!!!

Ziggy

3 years ago

Mish its admirable that you adjust nominal retail sales by the CPI; but its not enough because the CPI understates street inflation. Think about your own consumption…what price increases are you experiencing? Nominal sales are wrong and adjusting those nominal sales by the CPI probably whittles it down to being about one third wrong. Here is a link to a You Tube video with unfiltered experiences from ordinary people https://www.youtube.com/watch?v=MbekbXIpalk. This is from July 1st; he publishes new videos at least daily and discloses where each of these individuals are located. Very eye opening!

JackWebb

3 years ago

Reply to Ziggy

Inflation is felt differently depending on your situation. The biggest victims are young renters and those buying their first house. If you’re old and own your house, not so much. Your mortgage payment is fixed, or maybe there isn’t one because (like me and 1/3 of homeowners) you’ve long since paid it off. At my age, things-wise, I’m starting to think of how to get rid of stuff rather than buy more.

Food, motor fuel, and heating fuel (propane, in our case) have gone way up, but our living costs are very cheap. It helps to live in a county east of the Cascades, run frugally, so property taxes aren’t much of a burden. (As opposed to Seattle, which wastes more money than the Romans wasted water.) Our water comes from a well, and we’re on septic, so no water/sewer bills. Garbage collection is $14.50/mo. About 300 lbs of beef & pork in the freezer. Enough toilet paper to wipe the asses of a Third World village for a year. Enough guns ‘n ammo to take care of many zombies. Electricity is 9.63 cents/kWh. Sunsets are free, and are some of the best. “No sky like a Western sky.”

I worry most about the kids in their 20s and 30s, especially if they have children. We live well enough, but there are people around here who are working hard and playing by the rules, and are still closer to the edge. The Democratic Party used to stand for those people. Not now. Today, the Democrats are the party of the smug, oblivious rich bastards on the coasts. I didn’t leave them, they left me.

Carl_R

3 years ago

Reply to Ziggy

Lots of people make the arbitrary claim “CPI understates inflation”. Mostly they make this claim based on the fact that the CPI was changed in the 1990’s to give a lower result. That is true, but conveniently ignores the fact that the CPI that was used earlier systematically overstated inflation. Thus, after the reduction the CPI could be still too high, now too low, or about right. It is also true, as Jack Webb points out, that each person has a different situation, and a different pattern of purchases. Thus, the effect of inflation will be different for each person, too high for some, too low for others.

So, how do we know whether the CPI, as currently formulated, is too high, too low, or about right. If it’s within a few percent, there is no way you can really test it in the short run. In the longer run, however, the effect is cumulative, and will become increasingly apparent as time passes. What you have to do is to look at people who are directly affected by it, and the most obvious group that is directly affected is retirees. Each year, Social Security is adjusted according to the CPI. If the CPI is, say, 3 points too high, then after 30 years, the standard of living of retirees will increase by 1.03^30, a 143% increase. That is such a large increase, it will be readily obvious. Conversely, if the CPI is 3 points too low, then after 30 years, their standard of living will fall to 0.97^30, or 40%, a massive drop in the standard of living that would be obvious to everyone.

So, if we look at the spending power of retirees, what do we see? Well, in the early 60’s, they were at poverty levels. They generally lived with family, as that was what they could afford. Long term care facilities for Seniors were called “Nursing homes”, or just “Homes”. They were mostly tiny places, with minimal care, warehouses to hold people until they died. To be “put in a home” was the nightmare of the elderly, something they would resist as long as they were able. Businesses gave “Senior citizen discounts” because it was generally understood that they were generally unable to pay full price.

Fast forward to 1990, and things were dramatically different. The old “homes” vanished, replaced by assisted living facilities that were extremely far removed from the care facilities of 30 years earlier. They offered independent living while possible, assistance when needed, full medical care when needed, too, plus scheduled activities, buses to transport occupants to shopping places, and so on. Was there a statutory increase in Social security that moved retirees from abject poverty to middle class? No, it was just a steady increase in their standard of living due to an overstated CPI that more than doubled their standard of living. Honestly, Seniors should not be living in abject poverty, so a higher standard of living for the elderly is a good thing, but it should have been done via Statutory action, not by systematically overstating inflation.

So, what has happened to seniors since the CPI was changed in the 1990’s? If Shadow Stats is correct, then we should see Seniors back in poverty, the luxury long term care facilities of the 1990s gone, and a return of the “homes” to warehouse the elderly until they die. If the CPI is still overstated, we should see elderly moving from middle class to luxury, and long term care facilities becoming increasingly luxurious. If the CPI is about right, Seniors should be in about the same situation as the 1990’s. Remember, while we can not see the difference in a single year, over 20-30 years the difference will be dramatic if the CPI is wrong. What I see is that Seniors seem to be about the same at the 1990’s. Thus, I conclude that the CPI has been fairly close to correct over the last 20-30 years. What do you see?

Ziggy

3 years ago

Reply to Carl_R

I see a bifurcation in the rate of change in prices. Essentials like food, utilities, insurance are going up much faster than the CPI (take a look at your Medicare Part B increase relative to your Social Security COLA over the last 5-10 years). Discretionary items not so much. I will be 69 next month and as Jack Webb said I don’t need that much. I also generally do my own repairs(except for a new roof) so labor is flatlined. However prices are galloping in what I need because they are essentials. Renewal of my electric contract has a 50% increase, homeowners insurance 15-20% a year, food(I’m stocked up for 12-18 months) but to replace it would be a 25% increase. I ride a bicycle instead of driving so for the most part I’m dodging the gasoline increase(for how long). What about replacing a 25 year old vehicle maybe just one more time. As you say its the compounding in the disparity that makes the difference. I am still positive cash flowing but these kinds of increases are not sustainable. When you negative cash flow your nominal capital gets depleted in addition to the depletion in buying power due to negative real interest rates(calculated against a price measurement that understates what you spend on essentials). This is a very slippery slope! You need to hope that you won’t live a long life because in addition to the risk of your physical health deteriorating you are quickly slipping into poverty. I’m single so I have no one; if you have kids how the h… are they going to be able help you with the compounding that they will have to endure.

Do me a favor…watch the video I referenced. Its for July 1 and if you find it interesting watch another day or two. Ask yourself; are these people lying or exaggerating their experiences. How many multiples of those 3 percent yearly CPI misses are they quoting? Do you see these prices going down or do they just stop going up? What percentage of your retirement wealth has already been destroyed if they just stop going up? Do you expect real interest rates to become positive in the next 5-10 years?

Carl_R

3 years ago

Reply to Ziggy

Personal anecdotes are not particularly useful in evaluating the question of the accuracy of inflation numbers precisely because it will always hit people differently. One person is a renter. Another owns a condo with home owners fees. Another is a person with a recently purchased home. Another has a home that has already been paid off. One person gardens and raises chickens to supply much of his own food. Another buys all processed food. Another buys all organic food. Each will see dramatically different things.

I would agree with you that Baby Boomers may see a lower standard of retirement than their parents, but not from CPI being mis-stated. Rather it is the point you make about negative real interest rates. Our savings are being systematically stolen from us by holding interest rates under the rate of inflation.

Carl_R

3 years ago

I’m surprised that you haven’t mentioned that the wholesale price index, reported yesterday, was up 11.3% in June. One would think that high wholesale price increases will be reflected in retail prices sooner rather than later. Excluding food and energy, it was “only” 6.4%. Why exclude food an energy, when we all have to eat and heat? Because, over the long term, the index including food and energy is equal to the one excluding it, only is less volatile. With oil down in the last month, and most grains also down in the month, the energy component may be negative soon, but the core index is still high.

MPO45

3 years ago

Reply to Carl_R

Well said. Fed would be crazy NOT to do 100 next meeting and maybe another 100 after that but we’ll see.

Matt3

3 years ago

Reply to MPO45

Check out the Fed balance sheet. I think this suggests that they are crazy!

randocalrissian

3 years ago

Reply to MPO45

200 more basis points and public debt interest carry could easily breach $1TT per year. How long can we afford to face rates at 3% or more with such a heavy public debt burden? The negative feedback loop wants to know.

MPO45

3 years ago

Reply to randocalrissian

it can all be afforded easily with a default. No one wanted to believe inflation could be this high, no one wanted to believe the fed would raise rates this much, and no one wants to believe the US could default.

The choice is let consumers pay $15 for a dozen eggs and $100 for a pound of beef and watch food riots break out all across America and possibly the world or default on the debt and start over. Which one you want?

Lisa_Hooker

3 years ago

Reply to MPO45

I want them to print more money more often so everyone can have more everything all the time.

MMT == More Money Today

Fortunately paper and ink, physical constraints, are no longer necessary.

I don’t think it’s the Federal Reserve, I think it’s default of the US Congress.

JackWebb

3 years ago

Reply to Carl_R

The ability to pass along wholesale price increases is limited by elasticity, which increases during recessions. Wholesale inflation will put pressure on corporate earnings.

Carl_R

3 years ago

Reply to JackWebb

True enough. I’m sitting here, needing to do a price increase due to rising costs, but have concerns about the impact it will have on volume.

JackWebb

3 years ago

Reply to Carl_R

What kind of business, if I may ask?

Carl_R

3 years ago

Reply to JackWebb

Dry Cleaning. I have been in it for 35 years. Historically, if I do a 5% increase, volume drops 5%, so the revenue stays about the same. I did a 7% increase last year, and as expected, volume fell about 7%. While the same revenue with lower volume is somewhat good for the bottom line, at some point the volume gets small enough that fixed costs are more than variable costs, and it becomes hard to justify still being here. Once I had 50 employees, now I have 9, and that is with 35 competitors gone from the market, and only three competitors left in the market. I’m investigating selling my building and moving to another profession. I have no doubt that I can find a job, if I choose to, that pays far more than I can make running a small business in this economy.

Captain Ahab

3 years ago

The two negative MoM #s are telling with respect to non-durable goods, increased non-store sales not withstanding:

Department Stores: -2.6%

General Merchandise: -0.2%

Those are significant on a MoM basis, and reflect what we’ve already heard about Target etc. It’s all about the lowest price.

MPO45

3 years ago

Amazon Prime Day will likely boost July sales and in August we’ll have back to school sales. PPI is double digits so it looks to me inflation is here to stay for a while.

TexasTim65

3 years ago

Reply to MPO45

Prime day had massive discounts. Likely due to over stock.

randocalrissian

3 years ago

Reply to TexasTim65

Surprised to see business inventories up 1.4% in May. That train must be pretty close to running into a steel wall. For how long can you rationally build inventory when you already know you’ll need to discount it?

Retail Sales Look Strong But Fail to Keep Up With Soaring Inflation

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