Disappointing US Data Has Stagflation Vibe

US retail sales rose far less than expected in November, data out Wednesday showed.

The 0.3% advance was less than half of the anticipated increase (figure below), and came in near the low end of the range.

At the margins, the tepid read on consumption may allay some fears that the Fed is falling further behind the curve with each passing week. In recent months, robust consumption despite rising prices was suggestive of an overheating economy, even as it seemed to argue against sentiment surveys which show Americans are concerned about their financial prospects.

October’s sizable increase was revised slightly higher. At 0.3%, the ex-autos print for November was just a third of the 0.9% increase economists expected. The control group posted a 0.1% decline, a poor showing.

Obviously, the numbers will be overshadowed Wednesday by the December Fed meeting, but the data was notable to the extent it suggested Americans are retrenching. Even a modest deceleration in the consumption impulse would be worth parsing in the context of the wage-price debate and as a harbinger of a holiday shopping season hampered by Omicron.

Spending at electronics and appliance stores dove 4.6% last month (figure below) while department store sales dropped 5.4%.

Of course, retail sales are perched at record levels in nominal terms, something critics of stimulus (both monetary and fiscal) are fond of citing as evidence of an economy which scarcely needs a booster (see what I did there?).

“We shouldn’t get too down about these figures,” ING’s James Knightley remarked. “The numbers for October were revised up a touch and we need to remember that retail sales are actually 21.6% higher than they were before the pandemic struck in February 2020,” he went on to say, adding that “in comparison with the performance of Europe this is a fantastic achievement.”

Still, the growth read-through from November’s underwhelming control group print wasn’t good, and overall, the numbers suggested October’s spending data was skewed by a pull-forward effect tied to expectations of shortages.

Meanwhile, import prices rose more than expected in November. The 0.7% monthly gain exceeded consensus slightly, while the YoY print, at 11.7%, remained extraordinarily elevated. That’s just further evidence to support the contention that inflation pressures aren’t likely to abate anytime soon. Export prices rose more than 18% YoY.

Finally, Empire manufacturing beat handily for December, printing 31.9 against estimates for 25.

The price gauges fell (figure above), but as the brief color accompanying the survey dryly noted, both input and selling prices experienced “ongoing substantial increases” this month, just “at a slightly slower pace than in November.”

There’s a “transitory” joke, but at this point, nobody wants to hear it.


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6 thoughts on “Disappointing US Data Has Stagflation Vibe

  1. I’m waiting till after Christmas to buy anything I may need. There’s a ton of fully marked-up stuff sitting on store shelves waiting to be bought — and more on the way as supply chains are slowly unclogged. Everything will be on sale post-holiday.

  2. I still think that the likeliest scenario is that the consumer with his stymie checks was driving the inflation and, as excess savings get spent (US consumers clearly haven’t heard of saving for a rainy day), the inflation will normalize.

    Assuming the supply sided bottlenecks are now mostly created by unusual demand levels rather than by COVID restrictions, it also seems unlikely we get stagflation.

    So all said, I still expect inflation in 2022 to be way more manageable than now… and the Fed shouldn’t have to do too much.

  3. I guess I’m the only one that finds humor in this. 2 months ago the Fed was calling Stagflation 2.0 fears “overblown” and now here we are faced with the reality that oh crap maybe it’s true?? And the propaganda news networks have clearly done their job to brainwash enough people that stimulus checks are the problem and let’s blame the poor and blue collar workers for all of our financial problems forever. That narrative never goes out of style when you’re a billionaire and you control large swaths of media outlets. Meanwhile, barely reported on record breaking stock buybacks occurred at the corporate level last quarter while unemployment was growing (at record levels) and consumer prices went up for companies who were glad to take your extra cash for the stimulus check blamed inflation. I reiterate that we live in the dumbest time and the richest country in the world is only so financially and clearly not at all from an educational or cultural perspective. Here’s to another 200k deaths from a completely preventable pandemic by summer! #WINNING@LOSING!!!!

  4. The real question: how does Powell feel about Volcker?

    We’re not going to get the ongoing targeted fiscal stim we need (Biden’s anemic $55bn/yr infrastructure bill aside), so everything is still going to rest on the feds shoulders. It’d be one thing if the fiscal stim could turn on as the Fed turned off, but thats hopeless. So whats Powell to do? His only hope is to scare the hell out of the market now, or embrace his predecessor in a couple years.

NEWSROOM crewneck & prints