Wednesday's October retail sales report showed a strong retail sales increase, month over month (MoM) of 1.7% and a year over year (YoY) increase of 16.3%. Inflation has been the topic du jour and this has contributed to the increase in the retail sales data. The following two charts show 'real' retail sales, i.e., adjusted for inflation, for both the month over month and year over year time periods. The first chart shows real retail sales increased .7% MoM versus the reported nominal rate of 1.7% and the second chart shows YoY real retail sales increased 9.5% versus the nominal 16.3% increase reported.
inflation is also having an impact on corporate earnings reports. Quarterly earnings reports are peaking and inflation is creating a favorable variance to reported earnings for companies. An example is Tyson Foods (TSN), a holding for our client accounts. TSN reported quarterly results a few days ago and sales volume was down over 10% in their fourth quarter report ending October 2, 2021, but total sales were up 11.7% ($12,811/$11/460). The sales increase resulted from a 22.5% increase in prices. The year over year sales increase equaled 8.9%, yet volumes were down 2.8% but prices were up 13% as seen below.
(Click on image to enlarge)
In short, inflation is distorting the results for some of the economic data as well as corporate earnings reports. Some anecdotal data is suggesting the inflation pressure may be transitory, i.e., port backlog easing, inventory levels increasing, etc. For investors though, it is worthwhile taking into account the impact of inflation on reported economic and financial reports.
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