Spending Here, Production There, And What Autos Have To Do With It

While the global inflation picture remains fixed at firmly normal (as in, disinflationary), US retail sales by contrast have been highly abnormal. You’d think given that, the consumer price part of the economic equation would, well, equate eventually price-wise. Consumers are spending, prices should be heading upward at a noticeable rate.

To begin with, consumer spending – as pictured by the Census Bureau – was obviously boosted during January by the previous infusion of Uncle Sam’s beneficence (he’s your “uncle” and he has the cash). By how much, though? According to preliminary estimates released last month, for the month of January it must have been a lot. The latest update for February, which includes revisions to January, maybe it had been even more.

But then a lot less.

Meanwhile, December and the all-important Christmas shopping peak continues to go downward.

Wild swings in both the data as well as revisions to it are not normal.

Let’s back up a minute first to go through the numbers: last month Census pegged total retail sales at a seasonally-adjusted $568 billion for the month of January 2021. That was up an enormous 5.5% from (first revised) December 2019. Right now, however, the government thinks sales in December were ~$2 billion less than that but in January they had been $579 billion rather than $568 billion (an incredibly absurd 7.6% monthly gain).

Following, though, in February, total retail sales are now back down to $562 billion, an uncharacteristic month-over-month decrease of more than 3% from January’s revised number.

In other words, not only are retail sales all over the place, the Census Bureau is seemingly having trouble keeping up with so much spending volatility. And this level of instability, particularly predicated on non-economic factors such as Congress, is highly abnormal.

Sales that were falling rather sharply to end 2020 suddenly surge to start 2021 if only because the previous federal administration left a parting gift for the public only to drop sharply yet again as the same public can only bide its time (and its wallet) until the succeeding federal administration tries to outdo its predecessor. Come to think of it, the lack of consumer price inflation – even in the goods sector – actually does make sense.

As would what’s shaping up on the production side of the economy. Contrary to many mainstream assessments declaring the US system to be “blistering” or “scorching”, actual producers and their production levels linger instead as subdued, constrained, and depressed (in every sense of the term).

Perhaps because of the wild swings on the consumer side, maybe in spite of them instead looking longer-term, according to the Federal Reserve’s estimates for Industrial Production the goods economy took February off, too. Having only rebounded modestly (like employment) since last summer, production levels also fell sharply last month.

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Disclosure: This material has been distributed for informational purposes only. It is the opinion of the author and should not be considered as investment advice or a recommendation of any ...

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