The reason that store shelves are occasionally empty, as any social media hashtag trend will tell you, is that Americans are still buying an amazing amount of goods. For December 2021, Christmas was hardly canceled. The Census Bureau today reported that retailers during the biggest month of last year, of every year, grabbed an astoundingly huge $714 billion in overall sales.
Almost three-quarters of a trillion in a single month.
Not just the finale, though, total retail during the whole of last year was literally insane. See for yourself (one of these things is not like the others):
But this is only where the macro story begins; because of this mass of consumer demand and the price impacts it has had, while somewhat more complicated from here the analysis remains relatively straightforward anyway.
The theory had been Christmas demand got pulled forward by the very thing you see above; rather, more specifically, how the sudden buying behavior vastly favoring the purchase of goods at the expense of services contributed much, most, or even all to the logistical nightmare not just at the nation’s ports also its railroads and trucking lanes which by mid-year had scared the pants off consumers or at least retail middlemen who then rushed to make earlier buying orders if only to ensure there was sufficient capacity to feed the ruthless demand before losing the holiday deadline.
The Census data – seasonally-adjusted – does indicate this actually happened. Despite enormous sales for the season as a whole, it did end up front-loaded when compared to prior seasons. And that has implications insofar as the all-important rate of change goes.
Again, seasonally-adjusted basis, total retail sales for December 2021 were down a pretty stark 1.9% from November. Still high, still huge, but the trend is more toward fading Uncle Sam than not. Even though gasoline prices were down last month, too, and that contributed something to the monthly overall decline, retail sales excluding those registered by gasoline stations dropped even more; off 2.03% m/m.
And since CPIs have obviously accelerated with all that pre-Christmas folly, maybe jolly, putting retail sales in real terms (using the CPI) shows that the likely volume of goods has been on a steady decline (apples-to-apples) going back to April; December no different, if anything accelerating the trend.
Dating back to Peak Helicopter, real retail sales are down a very sharp 5.1%, making it an annual rate of -7.5% applied to the final two-thirds of last year.
Since retail sales remain historically elevated in every category, this -5.1% (or -7.5% annual rate) in real sales is simply the long-expected (outside the inflation narrative) reversion as the earlier helicopter effects fade further into that history, Americans start to balance their discretionary spending more toward services, and likely most important of all, what’s left is the non-artificial state of the economy (the whole labor market including what, meaning who, is left out of the unemployment rate again).
These are, of course, the very factors which have propelled the “growth scare” not just as it might be for the US, rather for a global economy that looks nothing like the American goods sector. In other words, if the one piece that had been “red hot” really does materially cool off, what is the world’s overall economic temperature going to be in 2022?
Some of that answer may already have been provided in the CPI data itself which is more and more disinflationary stepping away from US goods – in particular, beyond last October. If America’s foot came off the gas pedal just a bit, relatively speaking, since around October, this would certainly corroborate the after-October deceleration in prices.
In addition to the Census retail sales data, the Fed’s figures on industrial production also demonstrate that underlying baseline tendency. No matter how far in sales, output hasn’t come close to matching it (this along with supply bottlenecks the answer for the occasionally empty shelves). Those in the mainstream pushing the inflation narrative say this has been due to those same supply bottlenecks choking production potential, or whatever new strain of the pandemic creating a LABOR SHORTAGE!!!
According to the Fed, IP during December “unexpectedly” declined, falling 0.1% when compared to November (all data seasonally adjusted). For manufacturing, the change was -0.3%. And even though auto production (Motor Vehicle Assemblies) dipped again, manufacturing excluding autos was still down 0.2% m/m.
I don’t find the supply-problems-explain-everything theory anywhere close to comprehensive enough given how the second half of last year unfolded. With relative goods activity on the decline, retail sales particularly in real terms, even if still historically high that would have been just the outcome which likely had kept reluctant producers so reluctant all along.
If they’ve been expecting what just happened in the back half of 2021, then what just happened would hardly be a reason to ramp up production any more than necessary.
This isn’t to claim there haven’t been supply problems, or that these haven’t held back some level of production; those things have clearly hindered particularly some industries like automobiles.
What it all boils down to is how 2022 begins under a darkening cloud of widening macro suspicion, especially when compared to how 2021 had. In other words, nothing here, neither retail sales nor industrial production, disprove the growth scare.
On the contrary, each data set only adds more to that same set of misgivings. Christmas was fantastic for retailers, and consumers, too, yet the downswing is very clear anyway and unlike early 2021 there is no helicopter or whatever else waiting early in 2022 to reverse it. (Don’t hold your breath for outside help from Xi, either.)
Demand in the US for goods has absolutely outpaced the supply, boom, CPI. Yet, even as supply curiously does adjust if slowly, what happens as demand doesn’t continue at the same relatively high rate? If it works out this way, “inflation” begins to disappear from goods in more the same way it already seems to have dissipated from services (and elsewhere around the world).
It’s not a question the FOMC will be wrestling with given how much they’ve boxed their own policies in by blatantly switching inflation sides and being so outspoken doing it. Taper and rate hikes for an economy that’s losing steam in the US, and what further knock-on effects those might have outside the country (we’ll get a pretty big clue Sunday night when the Chinese report their Big Three economic data along with Q4 GDP; early guesses are not encouraging, and those get made by inflation-ists).
There’s really not any conundrum; just an unwillingness to concede the possibility the justifications for taper and rate hikes are, yet again, in, of, and for the wrong economic situation.