How Much Has Inflation and Free Money Goosed Consumer Spending?

Retail Sales from Commerce Department, chart by Mish

Retail Sales from Commerce Department, chart by Mish

Earlier today 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

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 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