Government gives consumers Free Money, retail sales spike. Free Money peters out, retail sales sag. Welcome to the new normal.
By Wolf Richter for WOLF STREET.
The $1,400 stimmies that started flowing in March were still flowing voluminously in April, and the last big waves are still flowing in May, and then they’ll peter out. For retailers, this petering out will be a moment of truth. But in April, those stimmies kept coming and kept getting spent.
Retail sales in April maintained the peak of the epic WTF spike of March, as Americans spent the same epic record pile of money of $620 billion (seasonally adjusted) at their favorite brick & mortar retailers, online, and at restaurants and bars, the Census Bureau reported today.
Price spikes in motor vehicles and price increases in other segments had a lot do with it. Total retail sales were up 20.4% from April 2019. This gives the epic WTF chart of the year a flat top, and a drop in May, when the stimmies peter out, is practically guaranteed:
New & used auto dealers and parts stores: Sales rose another 2.9% in April from March, after having spiked by 17% in March from February, to a WTF record of $139 billion, seasonally adjusted.
This comes after months of tight inventories made worse by the chip shortage fiasco that is now gripping the automakers and crimping the supply of new vehicles for rental fleets that are then not selling their remaining older vehicles at auction, which crimps the supply for used vehicle dealers, triggering massive price spikes in used vehicles – with the CPI for used vehicles exploding by 10% in April from March:
These are sales measured in dollars, not in units, and they’re not adjusted for price changes (inflation). The price increases have been massive and have therefore a massive impact on the retail sales figures. This is what the CPI for used vehicles did:
Sales at new and used vehicle dealers and at parts dealers are the largest segment of retail sales. In April, they accounted for 22.5% of total retail sales (in the chart below, top black line).
The other top retailers by category (details on them in a moment):
- Nonstore retailers (top red line), mostly ecommerce retailers, #2 but far below vehicle and parts dealers.
- Grocery and beverage stores, #3 (green line).
- Restaurants and bars, #4 (purple line).
- General merchandise, #5 (yellow line).
Ecommerce and other “non-store retailers”: Sales ticked down 0.6% in April from March after having jumped 6% in the prior month, to $87 billion, seasonally adjusted. Compared to April 2019, sales surged by 36%! This category includes ecommerce, mail-order operations, street stalls, vending machines, etc.
Food and Beverage Stores: Sales ticked up 0.4% in April from March to $73 billion, roughly flat for the past 12 months, but at high levels – up 15.5% from April 2019 – as some consumption has shifted from offices to households, thanks to working from home.
Restaurants & Bars: Sales rose 3.0% in April from March, after having spiked 13% in the prior month, to $65 billion; up 2.8% from April 2019, thereby having recovered roughly to the level before the Pandemic. That restaurants are raising their prices has a lot to do with it:
General merchandise stores (minus department stores): Sales fell 5.4% in April from March, to $55 billion, undoing much of the spike of the prior month. They were still up 13.5% from April 2019. This includes the brick-and-mortar stores of Walmart, Costco, and Target, but their ecommerce sales are included in nonstore retailers:
Building materials, garden supply and equipment stores: Sales dipped 0.4% in April from March, after the 12% WTF spike in the prior month, to $43 billion, up 36% from April 2019. The WTF spike in the prior month was in part powered by price increases, including for lumber:
Gas stations: Sales dipped 1.1% in April from March to $46 billion. Sales in both months are still the highest since 2014, on substantial price increases for gasoline: Over the first four months of this year, the average price of gasoline in the US has risen by 28%, according to the EIA:
Clothing and accessory stores: Sales dropped 5.1% in April from March, wiping out part of the 22% stimmie spike in the prior month, to $23 billion, up 5.6% from April 2019:
Department stores: sales fell 1.9% in April from March, to $11 billion. Despite the power of stimmies, sales were still down 5% from April 2019. Nothing is going to save this form of retailing from irrelevance. This includes sales at the brick-and-mortar stores of Macy’s, Kohl’s, J.C. Penney, etc., but not their ecommerce sales, which are reported under ecommerce.
Sporting goods, hobby, book and music stores: Sales fell 3.6% in April from March, after the 24% WTF stimmie spike in March from February, to $9.6 billion, up 44% from April 2019:
Furniture and home furnishing stores: Sales dipped 0.7% in April from March, to $12 billion, but up 25% from April 2019:
Electronics and appliance stores: Sales rose 1.2% in April from March, after the 17% stimmie spike in March, and were up 5% from April 2019. But as most consumer electronics and a lot of appliances are now sold online, brick-and-mortar sales were below where they’d been 15 years ago:
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So the inflation we currently see is because of free monies given to general public. What would happen when the free money is no more given and all the moratorium/ban stops.. I guess deflation then
Inflation can keep the plateau going. There are way more ways to keep spending. Don’t forget the saving rate is higher and credit care not spent much by American standard now. Also the big piggy bank from housing.
Deflation is very rare in all FIAT currency countries. Even Japan just has a minor one.
Japan has pulled out all the stops for 30 years, including the BOJ buying a ton of ETFs to prop up the stock market.
I think should tell you something about how powerful deflationary forces can be and how deathly afraid of it the banks are.
Japan pegs to $. When $ goes so goes Yen.
The Yen floats. That’s why it’s an FX trade.
Robert,
Count me out. I’m not wearing any n95 mask especially after I get my second shot next week. In fact I’m not going into any business that requires a mask unless I’m forced to go to the place.
As long as the vaccine prevents serious illness and hospitalization which has proven true I’m done with masks. If you want to wear one go ahead and wear it.
Come on Swamp!
The privately owned Fed indebts future generations to double-digit trillions so they can hand it to big money today to buy up and eliminate competition, and to suck up the cheap bankrupted assets caused by the shutdowns.
7-8 TRILLION$;–think that’s worth confusing people for a couple months about masks, vaccinations etc? Figure that corporate America spends billions on advertising to get a tiny bump in sales and profits. Why not go for the Trillions?
BIDENFLATION is destroying us. I must be getting really strong, I can carry $200 worth of groceries!
That’s my feeling. Everything I’ve read about this new strain is that it may be more infectious, but the vaccine is still effective against it.
Even India variant is not as bad as South African one. mRNA vaccine changed all the balance. The rollout of 3rd dose could be swift when it’s needed.
covid-19 is not as severe as SARS and every gov tries to play down.
Who says? If you want to wear one it’s your right but DON’T TELL ME or use the government gun on me. Businesses are within their legitimate rights of business operations and liability to require for their establishment. But I am 100% ready to oppose these unfounded edicts. Also, why don’t YOU PAY FOR THOSE MASKS??
Maybe you should look up the 1905 Supreme Court decision Jacobson v Massachusetts.
The government can FORCE you to get vaccinated.
They can already FORCE you to wear a seat belt.
You don’t have unlimited rights.
“If one of the nastier virus strains lands on our shores (possibly by mail from India or wherever), then we could easily see more lock-downs this fall, followed by more stimmy (gimmy?) checks.”
Take this fear-mongering NONSENSE somewhere else.
If you haven’t noticed you’re already in the middle of a sci-fi pandemic movie with an R rating. If the hundreds of thousands dead haven’t convinced you of the seriousness of this matter, I don’t know what will. This is a matter of science, and not personal opinion. Our leaders have failed us all.
We must hope for the best and prepare for the worst.
He’s been like that ever since he accepted mainstream media as his Lord and savior.
Jon,
Most of the inflation has been caused by a lack of competition, combined with supply chain shortages and changes in consumer behavior (stuck at home, possibly watching kids and needing a home office, among other things). Alot of companies rose prices, just because they could and prices were passed up supply chain. The free money is definitely a factor too. When most people stopped going on vacations and going out for entertainment and eating at restaurants and stopped shopping at clothing stores; they were left with more money (combined with free money) to spend at retail stores and online stores and delivered food and other things.
As for once it ends, it will vary by thing, some things will come down, some won’t. Alot of people will be partially stick in “hidey in the house” mode for years and may never fully recover. There is also the fact that prior to the pandemic, a recession was looming and could come after pandemic (could lag by several years or be a very unusual recession). At this point, no one can really say or predict what will happen.
‘Neanderthal thinking’ of white house with the new mask free guidelines and an end to stimmies will get people back to work and there will be an economic recovery.
After a long series of failures, one win Joe can brag about.
That is utterly ridiculous.
It’s really not ridiculous. There’s a huge percentage of the population that is utterly incapable of caring for themselves. That was true even pre-COVID. Right now, it works because the U.S. can borrow and print whatever it needs and importing stuff. What about when we can’t?
Funny how The Hill put out a segment exactly titled as below, search it out, if anything it’s a good laugh on how some on the politic spectrum can miss the mark so much even with data pointing straight at them. Leaving politics aside, other than the FED which has an agenda to keep peddling the inflation is a transitory narrative, it’s pretty irresponsible especially for a progressive show to lure people into believe inflation is nothing to worry about, really a disservice to all the data you have presented here Wolf.
“Krystal and Saagar: DEBUNKING Inflation Scaremongering”
Basically those two worthies are making the argument that the reported inflation is entirely attributable to yr over yr base effects, and since April 2020 was a Covid panic deflationary madhouse, current yr over yr numbers are misleading.
But…as Wolf’s base yr index charts illustrate, this isn’t inflation just above last yr…the index numbers are off much older base yrs…so the yr over yr base effect doesn’t apply.
In which case, those “The Hill” talking heads are numbskulls who don’t have a clue about how base yr index charts are supposed to work.
One small caveat…the G may be using some bizarro mutant methodology to generate these base yr index charts, one that hugely overweights last yrs number (which shouldn’t be weighted at all in a true base yr index).
Since few people dig deep into the methodologies, you can’t be 100% sure when dealing with the G.
There *are* plenty of cases where the G incompetently or intentionally gins up very, very misleading top line numbers (see unemployment rate).
I wouldn’t say inflation is nothing to worry about, but it is generally good news for debtors.
Yes, and the US government is the biggest of them all. That is why they want inflation.
Inflation in America will effect Americans far more than most. Americans (and American corporations) own the vast majority of US government debt. The US government doesn’t want large inflation, it will cause more issues then positives. The US government only worries about the short term though.
I don’t know why this truism persists. Inflation might devalue your debt burden, but it doesn’t protect you from the higher cost of living.
If 10% of your budget is debt payments and inflation devalues it 10%, that pales in comparison to 90% of your budget going up 10%. So for a $50,000 budget, 10% inflation drops your debt payment $500 from $5,000 to $4,500, while it raises other expenses from $45,000 to $49,500. $4,500 to save $500? What is seen and what is not seen.
Any borrowing will be at higher prices and probably higher rates.
One might argue that wages will increase. Not necessarily (as anyone who remembers the stagflationof the 70s knows), and if they do then it will likely increase inflation.
Currently we have consistently choke points on economic activity due to things like computer chip shortages. Stimulus checks compete for labor. This looks more like stagflation to me. Some people think this will go on a long time. I think factors like stimulus checks and chip shortages will be self-correcting. At least they will be be if the government and banks don’t screw with it. A big “if” for sure.
OTOH we’ve never been here before so my money is spread among several asset classes for various scenarios.
It is assuming that wage inflation is commensurate with general inflation, which actually seems like it was the case for some of the 1970s. It certainly seems like there’s pressure on wages now.
MarMar, there’s certainly pressure on the lowest wage jobs, but I don’t know if there’s corresponding pressure on the jobs that were paying, say $80k.
FYI @RNYer et al – I have received 2 unsolicited job offers this year. There is intense interest in Tech in expanding workforces and capabilities.
My current salary is well in excess of $200K. If I do not receive a reasonable raise (> 20%), I will go with one of the two offers, or (since I have the means) leave the workforce to pursue my own objectives.
This sounds like the same bull s$it that you hear on the Rick Edelman show here on WMAL. Same with the Mortgage Radio Show, where they are pushing cash out refis to use to speculate in the casino.
To clarify, this was in response to the comment that inflation was good news for debtors.
Amazon is expecting the surge to continue. They are hiring 17K people at 17 bucks an hour with 1000 dollars upfront signing bonus.
We trust in Jeff Bezos!!
MB
Plus 10000 in the UK with a number of corporate roles.
These are to work out all the ‘online’ taxes they are going to be made to pay. As if!
Jeff is bailing the Amazon controls. His new, over 400 foot, yacht is coming to completion soon. Four years in the construction, a sailing vessel from what I have read. Cost not confirmed, but clearly in the $500 million range.
I’m done with Amazon. The only thing I buy from them is books.
Amazon has definitely jacked prices over the last 4 or 5 yrs…especially on used books.
What market will $17 per hour pay the rent in? We’ve got a housing problem.
After the past year can the median income buy the median house anywhere in the US? It seems to be a big problem everywhere at the moment. New normal or another bubble waiting to burst
The soon to be world’s first Trillionaire….
Considering new CDC mask guidelines, my state plans to fully open up by June 30 or even sooner if the 70% vaccination rate target is hit before then.
I’ll bet that we see is a spike in commerce this summer as people get and try to shake off all those pounds they gained around the house.
The notion of pent up demand has been debated. Now we’ll see what the data has to say about it!
https://tradingeconomics.com/united-states/retail-sales-ex-autos?utm_source=alerts&utm_medium=email&utm_campaign=alerts_more_button&utm_content=%2Funited-states%2Fretail-sales-ex-autos
IMHO the stimulus check bump has faded in April 2021 MOM per above link
FDR,
1. The Trading Economics chart you linked excludes new and used vehicle dealers and parts. But that’s 22% of total retail sales! The biggest part. Excluding them is BS.
2. Look at my chart, the first one. March and April both were HUGE outliers. Both here HUGE blowout numbers. There wasn’t any visible fading. Some categories were up, some were down. But HUGE numbers all of them.
3. I agree with you that this was a high, May is going to be lower.
Some of these crazy increases (such as building materials) absolutely can’t hold…..unless wages move up significantly. Construction activity is already starting to slow.
Wholesale lumber prices crested and took the first small step down yesterday.
Actually, I made a lumber run today and prices were down almost 10% from last month. Of course my job is almost done. :-)
It looks like a blow-off top. From almost $1,800 down to $1,390.
The FED has blown the mother of all asset price bubbles, and now they’re trying to maintain everything at that level. It can’t work. Even if they’re able to, the people can no longer afford the high rents, car prices, etc. They can’t stop the blowback once the stimmy checks are gone. They’ve painted themselves into a corner with no way out.
Not a blowoff top. Just resolution of the underlying problem.
California plans to open up June 15 and the state is also overflowing with tax revenues. Best state in America!!! …. Newsom aside.
Of course it is. The Feds dropped tons of helicopter money to everywhere, people bought stuff, and the states benefited from sales tax collections.
Not only that, but with this last grotesque stimulus from masked Skeletor, the states got a massive bailout and are swimming in stimmy.
Yes, and the Democrats came up with a formula that rewarded states with higher unemployment.
1) There is hyperinflation : Crude oil is up from minus 40 to seventy, yet the Y/Y CPI is only 4.2%.
2) The non-store Retailers are about to plunge.
3) QQQ : the last two days short covering on falling volume, closing on dma50.
4) The DOW Futures 1H chart : a Lazer stop plunge, another Lazer stopped today climb.
5) From today, Walmart invoice :
Yellow honeydew : 3.28/ pc. / Acorn squash 1.18/lb. / small clementine : 2.98 3 lbs bag. / Granny Smith : 1.84/lb. / Bell pepper : 0.80 each. / Cucumber : 0.62 each. / Roma tomatoes : 1.68/lb. / Beef tomatoes : 1.98/lb. / Red cabbage : 0.98/lb…no inflation.
6) The Colonial bribe was paid. The lines will disappear.
7) A ME ceasefire will be signed next week. Each side will claim a total victory.
8) NDX best got an “event”..
9) Overextended verticals never last.
This does meet criteria for hyperinflation. Also, current price dislocations are due to the distortion of production, consumption and supply chains. These should autocorrect.
Hyperinflation happens when people lose faith in the currency. We’re nowhere near there.
People lose faith in their currency when they have an alternative. US dollars circulate to some degree in every country on Earth. Americans have no alternate currency. They are screwed.
Andy Haldane,UK, BoE economist said today. UK is set to grow at it’s fastest pace since WW2 (just like the deficit) overtaking the USA. Low covid rates and vaccinations are leading to a surge in consumer spending and lower than expected unemployment, However there is a risk of 1970’s style inflation rates with Boom turning to Bust he added.
So that’s why the Ftse got back above 7000 yet again for the umpteenth time today and the pound is over $1.40.
It’s all a game init? After Yellen knocked everything the other way last week.
OMG, you stealthed in a WTF chart in the last article, and now straight into a WTF article.
I think you need a WTF section in your headline bar up there. This is literally its own category now.
MCH
I love learning about USA on Wolfstreet in a way I cannot get on any other media. I thought some US residents might like a bit of context for the same problems faced by people in other places.
Maybe I forgot US was ‘exceptional’ and what happens in other places is of no interest to some.
I get you’re not happy in spite of Wolf letting it pass. So I’ll keep it to myself in future. WTF is Wolf’s thing and I have no desire to encroach in any way.
Believe MCH was replying directly to Wolf old in,,,
In any case, please keep on with your local boots on the ground reporting for us.
At least some of us read news sources all over the globe, and find, many times, much more coherent and consistent information regarding USA events coming from outside than MSM inside.
10) Today we drive less. Our cars are much more efficient than than in 2008. Today crude oil price is half of 2008, yet gasoline stations sales are the same. Why.
Because it costs $80 to fill up a pickup. I see that number a lot at pumps I drive up to. I spend at most $20 and it lasts a month at least.
It would actually cost $122.50 to fill my truck up at today’s diesel price should my 35 gallon tank be empty. I don’t run it down that far, but it’s usually between $90 and $110.
F 150
F 250
F 350
Ranger
Silverado
Colorado
GMC
Canyon
Ram
Tundra
Tacoma
Titan
Frontier
etc……
Best economy since dot-com bubble, with inflation well hidden.
Government is trying to match the supply of money with the supply of goods (China has never slowed down but they are trying). Too many goods and too little money is deflation. We saw this week in the stock market what happens when the shortage of shares abates, even momentarily. SPACs and IPOs are diluting the pool of assets. NFTs?? Crypto?? Too many investment choices, not enough cash, government solves the problem by printing more cash. (You thought they cared about you?) This is the inevitable result of too much success in developing new financial products. New cash (and this stock market lives on new cash) goes into consumer goods, not stock speculation and the Reddit crowd starts cashing in. That is enough to tip this thing over. Then states dig into their surplus and hand out checks? The problem has morphed from managing the supply of credit, which the central banks have in control, to a problem of cash – ergo liquidity.
Wharton School finance professor Jeremy Siegel was quoted today as saying he thinks inflation could hit 20% over the next 2-3 years. However, the increase in the stock market will more than compensate for that inflation rate…as if every consumer is fully invested in the stock market. WTF planet are these people living on?
Siegal wrote “Stocks for the Long Run”. He is talking his book. Financially and in a literary sense.
He published the book in 1994 when sp500 was under 500 so you have to say he made a good call.
Why could it be true? You don’t play along you lose.
Probably the same planet as former Housing Secretary Shaun Donovan, who was recently asked to guess the median price of a home in Brooklyn and guessed $100,000.
Pretty sure I read in this blog not too long ago that everyone is abandoning big cities.
They are probably giving away houses in Brooklyn.
With 2 hour commutes common around here, I think with the gas shortage people may think twice about abandoning the cities.
Put “my forecast for 2008” into Google and read the first link. If you were going to give any credence to Jeremy Siegel, this article should disabuse you of that notion.
LOL. But a broken clock is right twice a day. This is his moment!!!
Haha. Of all of the foolish shills out there, I think Lawrence Yun is the only one I listen to less.
Tomorrow I will get up at 6AM and try to get some gas. Gas lines are forming at every station that has gas. Cars are lined up blocking traffic. The police don’t care if traffic is blocked.
6AM I can deal with. During Carter I had to get up at 3AM to get near the front of the line. I’ll do what it takes to get gas. I may even head for that station that’s charging $7/gallon.
Why? The pipeline is back open and there isn’t really a shortage except from hoarders. I saw one news report where an idiot had giant plastic bags filled with gas…in his trunk. Maybe 15-20 gal in each bag. I wondered…how do you get it out?
Is it bad that part of me hopes he gets rear ended and wins a well-deserved Darin award?
Hummer with 4 full gas containers burst into flame as it left a gas station in FL yesterday!
Glad my truck has the 34 g tank,,, though I did have to pay $100.33 in Elko, NV two years ago after a dry run down from ID.
First and only time over a hundred ever,, but possible IF we can get out that a way this year.
Reporting also from the north of the swamp suburbia.
I got lucky enough to fill my gas last Tuesday 5-11-21. Yesterday was so bad and today, lot of gas stations were empty. The car lines were at-least half-a mile long on the stations available. I saw pictures of gas filled in the baskets and containers not approved to store gasoline. A hummer was burned due to that.
Cops can cite a single car blocking traffic. How they can cite tens or hundreds of cars waiting in line for the gasoline?
If there is moment to promote electric cars and alternative green fuels, this is the moment. I expect an announcement for rapid transition to alternative fuels soon.
Recently I learned that, the nations capitol is can be gridlocked for weeks by cyber attack on the gas supply lines…
I’m a big fan of electric cars, but do you not think the power grid is just as susceptible to attack?
Do you mean solar panels on the roof top? Nope I do not think so.
Yes, anything connected to a computer system and internet is susceptible to attack but an electric car can be charged from the local windmill?
Again, I am totally ignorant of the details, but this is a good time to promote in-house alternatives to gasoline just like the Jimmy Carter Oil embargo situation.
I don’t have the data, but I’d venture to guess that most people who have electric cars do NOT have solar panels on their roofs, and are relying on grid power.
If that’s the case, I’d say that the grid is as susceptible to cascading failure (as happened in 2003) as the pipelines are vulnerable.
It’s kind of funny that critical functioning businesses are required to have back up generators mostly diesel. Probably Whitehouse has backup diesel. Fossil fuel bad.
Regarding the pipeline hack, I suspect that Beijing and the Kremlin are not too happy about these crooks. They went and used something that I’m confident both China and Russia knew about and were saving for a rainy day …
Topped off my Subaru this morning. Waited behind 3 cars. Not bad. 95% of the gas stations are closed. Put the car in the garage to use for emergencies.
Oh, its the tiresome Jimmy Carter rant again!
You been watching Sean and Tucker again?! :)
Those who got a raise have a target on their back.
Wages are inelastic. They never go down.
The only way to cut expenses is layoffs.
Nobody got a raise this year.
Travel expenses went to zero.
Multiple office leases were just not renewed.
The lights were turned off and heat was turned down to 42F for the rest.
None of the bathrooms or breakrooms were cleaned.
The trash cans have sat empty for over a year.
Free coffee is no longer brewed
No company paid lunch meetings.
Security staff was minimized
The building to building shuttle was shut down.
I guess the company vending machine revenue is down.
Companies are saving so much. Where is it going?
QE – Stimmies – UE – No Rent / Mortgage to pay – College Free – Trillions in InfraSolarture
Goods / Services / Commodities / Assets are all gonna go uuuuup for awhile. Best grab the assets.
The assets already went up. Now it’s time for them to go down, WAY down.
With stimmy induced dopamine studies, scientist FED successfully tested “imposed interbrain synchrony shapes social interaction and social preference in right-brain dominated Americans.”
1,000 units at $1 each = 1 unit at $1,000 each. Inquiring minds want to know more.
It is reported elsewhere in this blog that Americans paid down their credit cards in (near) record amounts. Wouldn’t this indicate that retail spending can be extended another few months as they pile up new balances? That would put the crater further out. Say,… late November?
More stimulus checks. Read “Fiat Money Inflation in France” in free PDF form. Short book describes political behavior in a crisis. Bye $.
Stop treating your low wage employee’s like sh_t and you might keep them from jumping ship. DUH
One interesting point here….
….is that we *are* starting to see a recovery in spending for services (per reopening)
So perhaps the spending for good will flatten/decline in the coming months.