On Tuesday, June 15, 2021, financial media was frantic with headlines claiming retail sales had fallen 1.3% compared to the prior month. This lead most economic reporting for a couple of days, and was surprisingly negative, given the true situation. Negative economic news from the mainstream media during this Administration is rare, so we wondered what was going on.
First, look at the “reasons” proffered by the media. Supposedly, people are spending less on things, and more on experiences. Anyone who has followed the spending patterns of young people for the past decade knows that to be a trend. COVID-19 limited the universe of available experiences. Americans are now being released to pursue those delayed experience-oriented opportunities. No surprise then, that they are exercising their regained free will.
One of the more obvious data points in the comeback of experiences shows in the relationship of food purchased in grocery stores vs. restaurants and bars. Prior to COVID-19, restaurant and bar sales had overtaken food store sales, but that quickly reversed during the pandemic. In May of 2021, “food eaten out” sales once again eclipsed grocery sales.
Taking a deeper dive into data under the headlines is revealing. Actual statistics bely the negative tone of May sales headlines. Despite experiencing a slight decline in May, the overall level of recent retail sales has been spectacular. In the past 3 months, retail sales in the U.S. increased by 50.5% on an annualized basis. Those of us who have inhabited this planet for a long time have never seen data this strong. Among the largest changes were sales of cars and trucks (up 90.5%), clothing (up 145%), and “food out” (up 116%). Again, all figures are annualized from the prior 3 months’ data.
Adding to what should be good news was an upgrade to the Atlanta Federal Reserve’s estimate of overall economic growth for the quarter, which is now an astounding 10.5%. Again, unprecedented in our lifetime.
Inflation data was the downside of the week’s economic data. May monthly data showed a whopping CPI increase of 0.8%, bringing the 3-month annualized rate to 9.9%. For the preceding 12 months, inflation data showed a reported 6.6% increase. Despite the FED’s diligence in reporting the lowest possible increase in inflation, these changes are scary large.
Back to the original premise, what was the pro-Biden media trying to accomplish with those negative headlines? As with so many media proclamations, I have no earthly idea. Excluding inflation data, our economics are just plain good. For now, anyway.
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