Inflation Magic: Retail Sales +19.5% Year-over-Year, But Flat with Blowout Oct, as Department Stores Sagged, Auto Dealers Had No Inventory, and Cannabis Stores?

Spiking prices inflate retail sales across the board, but particularly at auto dealers and gas stations.

By Wolf Richter for WOLF STREET.

Retail sales in November, including at restaurants and bars, hit a new record of $640 billion seasonally adjusted annual rate, and a record of $649 billion not-seasonally adjusted annual rate, up by 19.5% from November last year, and up by 22% from November two years ago, according to the Census Bureau today, as raging inflation inflated retail sales.

But compared to the blowout October, sales ticked up 0.3%, seasonally adjusted, as department stores, after a year-long post-lockdown get-out-of-the-house honeymoon, reverted to brick-and-mortar meltdown. Vehicle dealers, with little inventory to sell, countered plunging unit sales by massively jacking up prices. And ecommerce sales, not seasonally adjusted, spiked 20% from October, to a record, but seasonal adjustments got rid of that gain entirely.

These are sales of goods at brick-and-mortar locations and online. Services, such as insurance, healthcare services, housing costs, or haircuts, are not included.

Retail sales have been goosed by $4.5 trillion in money-printing in 21 months, and by interest rate repression despite raging inflation, that caused asset prices to spike, and caused people to spend this manna from heaven no matter what the price. And some of the $5 trillion in government-spending of borrowed money was channeled to people who then also spent it no matter what the price.

Hence the spike in retail sales since June 2020, and the worst inflation in 40 years, with even more inflation building up further in the price pipeline.

Retail sales are not adjusted for inflation, and often huge price increases are inflating them. Four retailer categories account for 52% of total retail sales: New and used vehicle and parts dealers, food & beverage stores, restaurants, and gas stations.

And prices at those retailers have skyrocketed, according to the Consumer Price Index, November compared to a year ago:

  • Gasoline prices: +58.1%
  • Used vehicle prices: +31.4%
  • New vehicle prices: +11.1%
  • Food prices at stores: +6.1%
  • Restaurant Prices: +5.8%

Magnitude by retailer categories. Auto dealers and parts stores are by far the largest retail segment (black line). Nonstore retailers – mostly ecommerce – have surged to second place (red line), followed by grocery & beverage stores (green), restaurants and bars (purple), general merchandise stores (yellow), building material and garden supply stores (gray), and then the small fry, such as department stores at the very bottom:

New & used auto dealers and parts stores: Sales were flat with October, at $126.5 billion (seasonally adjusted), stuck for months after they ran out of inventory following the free-money-blow-off spike in March and April. But sales were still up 12.7% from November 2020 and by 19% from November 2019. As unit sales have plunged amid vehicle shortages, these dollar sales were accomplished by rampant price increases and a shift to loaded and high-end models:

The number of new vehicles delivered to end users plunged this year – in November, to a seasonally adjusted annual rate of 12.86 million vehicles, down 25% from November 2019 – as dealers are short on inventory, while automakers, still bogged down in semiconductor shortages, are prioritizing loaded and high-end models to maximize their revenues:

Huge price increases and a shift to high-end models caused the average transaction price (ATP) for new vehicles sold in November to spike by 18% year-over-year to a record $44,043 per vehicle, according to J.D. Power estimates, as auto dealers and automakers are raking in record per-unit gross profits:

The number of used vehicles sold at dealers in November was roughly flat with October and year-over-year, at a seasonally adjusted annual rate of 20.4 million units, as prices have completely blown out, with retail prices up 31.4% year-over-year, according to CPI:

Ecommerce and other “nonstore retailers”: Sales spiked 20% not-seasonally adjusted for the month to a record $105.3 billion, surpassing December 2020 even though Decembers are always the peak months, and were up 15% from a year ago, and 41% from two years ago. But the seasonal adjustments were huge for November, and chopped seasonally adjusted sales down to $92.2 billion, still a record.

These nonstore sales include online-only retailers and the online sales of brick-and-mortar retailers, as well as sales by mail-order houses, street stalls, vending machines, etc.

This chart shows the not-seasonally-adjusted spike in November (red) and what seasonal adjustments have done to it (green):

Food and Beverage Stores: sales jumped 1.3% for the month, to $78 billion (seasonally adjusted), by 8.6% year-over-year, and by 22% over two years, fueled by surging prices:

Food services and drinking places: Sales jumped 1% for the month at a record $74 billion (seasonally adjusted), up 15% from November 2019, amid the biggest price increases in 40 years:

General merchandise stores: Sales ticked down 0.3% for the month to $59 billion, down just a tad from the free-money-blow-off record in March 2021, but up 12.3% year-over-year and up 21% over two years. These stores include the brick-and-mortar stores of Walmart and Costco, but do not include department stores.

Gas stations: Sales jumped 1.7% for the month, 52% year-over-year, and 30% over two years, to a record $55 billion, powered by gasoline prices that spiked 58% in November year-over-year. Sales at gas stations include all the other stuff people buy there, such as sodas, snacks, and motor oil:

Building materials, garden supply and equipment stores: Sales rose 0.7% for the month, 9.3% year-over-year, and 26% over two years, to $40.6 billion. But the sudden stimulus-fueled DIY-spike in March is now a distant memory:

Clothing and accessory stores: Sales rose 0.5% for the month, to $26.5 billion, matching the record of June 2021, up 26% year-over-year, and up 18% from two years ago:

Miscellaneous store retailers, including cannabis retailers: Sales ticked down 0.3% in November, after a huge blowout spike in the prior five months, to $14.9 billion, up 24% from a year ago and up 28% from two years ago. In addition to cannabis retailers, this category includes other specialty stores, such as beer brewing supply stores, telescope stores, arts supply stores, etc.

Department stores: sales plunged 5.4% for the month, to $11.7 billion, the lowest in six months, but were still up 5.9% from two years ago. After months of being stuck at home, people had flocked back to department stores after the lockdowns, and for a while it looked like department stores would make some sort of come-back, but now that appears to have ended. Sales are down 41% from the peak in the year 2000:

Furniture and home furnishing stores: Sales were flat for the month, at $12.5 billion, but up 16% year-over-year, and 25% over two years:

Sporting goods, hobby, book and music stores: Sales rose 1.3% for the month, 20% year-over-year, and 45% over two years, to $9.5 billion:

Electronics and appliance stores: Sales plunged 4.6% for the month to $8.0 billion, but were still up 17% year-over-year, and down a tad from two years ago. This category covers only the brick-and-mortar stores of specialty electronics and appliance retailers, such as Best Buy. Electronics and appliances are a big industry, but sales mostly take place online and at other brick-and-mortar retailer categories, such as general merchandise stores and home improvement stores:

 

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  105 comments for “Inflation Magic: Retail Sales +19.5% Year-over-Year, But Flat with Blowout Oct, as Department Stores Sagged, Auto Dealers Had No Inventory, and Cannabis Stores?

  1. Wisdom Seeker says:

    I’d love to see more unit-sales data, together with year-over-year non-seasonally-adjusted data. The auto data is mind-blowing.

    Without unit sales, it’s hard to disentangle inflation from genuine growth.

    The seasonal adjustment factors are not going to work very well (for a while) due to the all unique factors in the past 2 years.

    If we believe the CPI, then 19% year-over-year growth in retail dollar-sales should imply ~12% higher unit sales IF inflation is actually 7% (or whatever).

    If unit sales have in fact declined (as for autos) or not risen 12% (food, clothing?) then inflation might be significantly higher than the CPI would suggest.

    Employment is strong, and people are spending, but has supply kept up – are people genuinely better off this year than last year?

    • Wisdom Seeker says:

      Example: Wolf has a graph of gas station sales (which includes the snack-store sales as well as gas, but it’s mainly gas). There’s US Energy Information Administration data showing gas prices are much higher… But they also have data on gasoline supplies. Supplies are steady from 2019 (though up from 2020 with the COVID shutdowns). So 2020 was an anomaly which will distort seasonal factors. In Wolf’s graph, the 2021 gasoline station sales spike over 2020 is a mix of restored demand and higher prices, and messed up seasonals. But the sales change from 2019 is going to be mainly inflation. Bottom line is that we’re not better off in either auto sales or gasoline sales from 2019, and that’s a major part of the economy. And EVs are not big enough yet to change that overall picture.

      • RockHard says:

        One thing I wonder about – gas prices are higher now, but I think people got spoiled by the shutdown prices. In April 2020 I paid about $.75/gallon for gas one time. Now it’s about $3.25 which is higher than it’s been in the last 4-5 if memory serves, but it’s not the worst I’ve seen either (post Katrina, unleaded gas briefly hit $5/gallon here). Looking on GasBuddy, their 10 year chart shows that from 2011-2014, gas prices were a bit higher than they are now. So the gas chart isn’t jiving with my memory or GasBuddy’s either. Seasonal adjustment? Gas tanks are bigger than 10 years ago (we are buying more big trucks)? People are just driving more?

        • Seneca’s Cliff says:

          Just paid $5.00 per gallon along I5 in California.

        • Wolf Richter says:

          I’ve gotten used to seeing $4.99 and $4.98 in my neighborhood. So far, they have not yet put the ominous 5 in front. But hey, unlike last time (2008), we now have a hybrid that gets 42 mpg in the city (instead of 18 mpg like our power-crazy gas guzzler back then), and it’s the biggest car I have ever owned.

        • Tanksalot says:

          Joe Biden refusing to lift the Venezuelan and Iranian oil embargoes does not help.

          Kamala’s electric car comedy routine, “electric school buses!” is promising results in five to ten years.

        • Swamp Creature says:

          I couldn’t care less if gas goes to $7.00/gallon. I get to deduct nearly all my car expenses as a business deduction. That will mean I will pay less taxes. Also, there will be less cars on the road., and it will be much safer to drive. Right now its getting crazy out there.

    • Wolf Richter says:

      Wisdom Seeker,

      We’re going to get some more clarity when the inflation-adjusted “real” consumer spending data comes out. It won’t provide the kind of granular detail as retail sales, but I’ll cover durable goods, nondurable goods, and services, all in real terms.

    • Augustus Frost says:

      No, the country is not better off. It’s a credit binge as the article states.

      There is no way an actual economic depression (from the COVID lockdown) magically results in a real economic boom. The economy was already weak from 2008 to early 2020, entirely dependent for “growth” on increased federal deficits and the loosest monetary policy ever.

      The economy and financial system today is actually about as healthy as a crack addict. Remove the artificial support and both the economy and financial markets can’t sustain anything close to post 2008 performance.

      No, it’s not different this time.

    • Old school says:

      French tried the easy money in the 18th century. They cycled through several iterations before it blew things up. Expect the same this time. If you print it, they will spend it. Stop the printing the economy crashes. You don’t need to be an economist.

  2. anton says:

    New projections based on the median forecast by Fed officials sees the federal funds rate rising to rise to 0.9% by the end of 2022, to 1.6% by the end of 2023 and 2.1% by the end of 2024. (per MarketWatch)

    So basically low interest rates as far as the eye can see. I guess we can count on more inflation and for stocks and bitcoin to continue on its way up up and away

    • Jake W says:

      the mistake people are making is thinking that the earnings of companies won’t suffer from inflation. unless they think p/e ratios can rise forever.

      • Depth Charge says:

        Earnings no longer matter. So there’s that.

        • Anton says:

          A agree that PE ratios and earnings don’t matter. Look at apple for example. its market cap went from under 1T to almost 3T in the last 3 years. I looked at their sales growth. Its an impressive 40% over that timeframe, but that 40% increase in sales pales in comparison to the 311% surge in price per share, which went from $42 per share at start of 2018 to over $173 today. I am not even talking about the likes of Tesla. If apple were valued the way Tesla is on its earnings, apple would be worth 12 trillion and not its *almost 3 trillion. So I say buy up all the shit. Buy Zillow and Uber and all the dogs, because earnings really don’t matter. Not anymore.

        • Apple says:

          Corporate earnings are at an all time high. Not sure what your point is.

  3. Wisdom Seeker says:

    Wolf – Found an error – there should be a graph “Building materials, garden supply and equipment stores” (based on the text), but the graph that’s shown in that spot is a duplicate copy of the Gasoline Store Sales graph.

  4. LK says:

    Fed put out a statement today where they seemed to bend over backwards in their language to make their tapering action seem not like a tapering action.

    “Beginning in January, the Committee will increase its holdings of Treasury securities by at least $40 billion per month and of agency mortgage‑backed securities by at least $20 billion per month.”

    That is a funny way of saying they are tapering to $60 billion per month. Are they so scared about spooking Wall Street or its algorithms that they make a decrease sound like an increase? I really want to understand the gymnastics it took to write a statement like that.

  5. Michael Engel says:

    1) A waitress was sacked after getting $4,400 tip.
    2) An empty car dealership floor salesmen getting 5% commission on
    online transaction, selling five pieces/m, new & old, averaging $30K each,
    might make : 5 cars x $30,000 x 0.05 commission = $7,500/m.
    3) For an aggressive RE saleswomen $7,500/m is peanuts.
    4) The Labor Force is 162M, a lower high, because there are 20M – 30M workers in the black market. Higher wages benefits in other sectors might extract them from the black market.
    5) Fred : The Quit rate, total private : 3.1%
    6) Leisure & hospitality : 5.7%.
    7) Mfg : 2.5%.
    8) Professional & business service : 3.5%
    9) Construction : 2.5%.
    10) Education & health service : 2.5%.
    11) The quit rate total nonfarm is the highest ever at 2.8%.
    12) Help wanted !

    • Ron says:

      You forgot trucking transportation

    • El Katz says:

      ME:

      Historically, an automobile dealership won’t keep a salesperson that only sells 5 units per month. They pare down the marginal staffing to keep the sharks well fed.

  6. 2banana says:

    Articles in the news.

    The “smash and grab” discount have hit Cannabis stores.

    California has dropped some Cannabis taxes as the, ummm, alternative market has been crushing legal sales.

    “Miscellaneous store retailers, including cannabis retailers: Sales ticked down 0.3%:

    • WES says:

      Sad that only the black market can keep the biggest criminal honest!

    • Wolf Richter says:

      Cannabis taxes are huge in CA. They’re levied by the state at three levels, sequentially, from production to sales, and then the municipality levies another layer of taxes on top of it. The purpose of legalizing pot was to get it out of the black market, and it worked to some extent. But if you tax too much, it encourages the black market. And that’s the case. If they just had a 10% tax on cannabis all the way through, the black market would be largely finished. CA cities are now looking at ending or reducing their layer of taxes, that go on top of the three state layers.

      • 2banana says:

        What fantasy meta state do you think you are living in?

        “But if you tax too much…”

      • KGC says:

        High cannabis taxes in CA are actually pushed by the counties where illegal growth has been the backbone of the local economies. They did everything they could to keep the State from making it legal, and now they spend the time trying to keep the black market profitable.

        • Catxman says:

          The presence of a black market is usually the sign of a very wealthy primary market. Scalpers of stadium concerts make their money when there is high churn and interest in the basic product. If there wasn’t a strong interest, they wouldn’t get paid — and hence, wouldn’t do the work. Legal marijuana sales in California must jumping off the rails in intensity for such a strong black market to exist.

        • Dan Romig says:

          Ticket brokers.

      • CreditGB says:

        Didn’t China try this in the 17th century with opium? Pretty much blew up in their faces and lost several generations. Eh, it will probably will work out OK this time though.

    • Xavier Caveat says:

      I wondered when that would happen and/or lotsa robberies, as all 420 stores do is take in cash all day long, and security tends to be woeful.

      • Dan Romig says:

        Cannabis business vs US federal banking laws:
        “While the U.S. House of Representatives passed a bipartisan bill to safeguard banking institutions that engage with state-licensed cannabis businesses four months ago, a companion bill in the Senate has stagnated, and the House sponsor is growing frustrated.

        The Secure and Fair Enforcement (SAFE) Banking Act is direly required to fix public safety concerns stemming from the industry’s absence of availability to formal banking.”

        Or as Thin Lizzy noted long ago:
        “Jimmy the Weed for greed was taken aback
        Johnny the Fox, you old sly cat
        Cleverly the Fox concealed his stash
        Crisp dollar bills leave no tracks”

        So if you run a business and can’t use a bank, what ya gonna do?

  7. sunny129 says:

    Fed announced that they will faster the tapering at the end of March instead of June!
    3 rates increase in 2022.

    Could some one explain me why the indexes zoomed from Red to Green in the last hr? What am I missing?
    Any how one looks at it, this bad news with decresed support fro Fed, going forward. Scratching my head!?

    • sunny129 says:

      I forgot to add:

      Omicron is NOT going away any time soo!
      Inflation will increase no matter what Fed pontificates!
      Supply chain problems persist or even increase to due to new covid strain!

      What incentives ahead for the Stocks zoom like that?

      • Depth Charge says:

        Quit the fearmongering already, it’s disgusting. You sound like you should work for CNN.

        • sunny129 says:

          Depth Charge

          Fear mongering!? Wow! If I am wrong I would like hear your version.

          I am merely stating the reality of facts on the ground! Guess you are one of those 45y or below, who believe the stocks can only go up, right?

          Read mkt history of 200 yrs. Been in the mkt since ’82. I make money either way bear or bull with options trading. Reversion to the mean cannot be banned for ever. Bull & BEAR are the two faces of the same coin. You cannot have the one without the other. Guess you are in non-believer group. All the best for you and yours!

        • Depth Charge says:

          I’m not talking about stocks, I’m talking about the fearmongering healthscare crap. “Oh, my GAWD, VARIANT!!!” This 24/7 fear porn is psychological warfare, and intentional.

      • Confused77 says:

        sunny129, stock price movement is based on expectations. The expectation today, before the announcement, was that the Fed would be more hawkish and taper faster and increase rates faster.

      • Gilbert says:

        Considering the survival rate of the population catching the variant it is nonsense to be panicked. Concerned maybe.

      • Swamp Creature says:

        “What incentives ahead for the Stocks zoom like that?”

        None

    • WES says:

      Is there anybody left who still believes what the Fed says?

    • jon says:

      Ideally FED should have started faster tapering right away. But they moved it to March. So it’s a good news. Also, FED showed reluctance to turn off the money supply and hike rates aggressively. Good for market.

      • sunny129 says:

        jon

        Fed cannot do any thing about Omicron, supply chains squeeze and inflation. Fed cannot force people to take jobs.

        Remember: If and when the panic comes, be the first one to panic!

        • LK says:

          I panicked back when the last self-inflicted government shutdown erased 25% of my seed investment money. Jokes on me, it seems.

        • sunny129 says:

          LK

          Where would you be if Mr. Powell had not showered 4+ trillions in the March of ’20, after Mkt tanked nearly 35%? This wouldn’t have happened under our, ole genuine American Mkt Capitalism until march of ’09!

          WE had 13 yrs of economic ‘expansion’ most of the money went blowing the asset bubble along with buying back shares++
          Do you think the market will keep on expanding(PE) without contraction after 13yrs? This everything bubble is world wide UNLIKE any time before, built on debt & leverage! If Fed cal land this ‘softly’ all powers to them!

        • Jon says:

          One easy way to tame inflation is to take away easy money but fed won’t do it and would give other excuses

      • K says:

        I am curious as to what level of “tapering” will be done. There is a mathematical issue that arises if interest rates are raised too high on rolled over, US treasuries, according to the committee for a responsible federal budget:
        QUOTE:
        This year, the federal government will spend $300 billion on interest payments on the national debt. This is the equivalent of nearly 9 percent of all federal revenue collection and over $2,400 per household. …
        Higher interest rates will mean higher interest payments and deficits. For example, if interest rates were one percentage point higher than projected for all of 2021, interest costs would total $530 billion — more than the cost of Medicaid. If rates were two percentage points higher, interest costs would total $750 billion, which is more than the federal governments spends on defense or Medicare. And at three percentage points higher, interest costs would total $975 billion — almost as much as is spent on Social Security benefits. On a per-household basis, a one percentage point increase in the interest rate would increase costs by $1,805, to $4,210.
        END QUOTE.

        Aside from that, the large number of US companies that are over-leveraged and also of investors who purchased shares on margin may cause many companies to become legally insolvent when their interest rates on their rolled over bonds rise. Their shares would also accordingly tank, even if they do not become insolvent: would you be satisfied getting a 2.8% rate of return, holding companies’ bonds if you could get the same return on treasuries?

        Hence, the stock market will crash if interest rates are raised. Furthermore, a huge part of the problem is caused by shipping delays and by production issues in the USA’s main supplier, China, whose “zero virus” policy is going to meet its eventual death due to the infectiousness of Omicron. That is what I predict.

        Many companies in the USA and China will fail. Will the frauds and improper accounting practices that will be revealed (like Bernie Maddoff’s frauds were revealed by the prior crash) be prosecuted this time. I have little hope: e.g., despite his many actions, which amounted to a modus operandi, presented at his trial, the court of appeal will apparently give Weinstein a new trial.

        Until we eliminate this kind of corruption, from cronyism in which we have a hierarchy of groups that protect their members and allow them to operate above the law and commit frauds (e.g., Maddoff and the SEC), the USA will not be competitive in many areas with countries that operate in a more united way like Japan or Germany. Now, the bribe taking by judges (and pre-bribes, so that judges get elected by funding from groups and will then have to protect those groups while on the bench) is effectively a corruption tax which all Americans and American productive companies pay, if they are not connected to the most corrupt groups.

        Like France before the revolution, we have an entire class of corrupt people that are above the law (e.g., if Weinstein were Hispanic or Italian or African American, would he get a new trial?) and do not have to pay taxes (due to the tax loopholes that they created, like the exclusion from income for foreign income, so that companies like “Apple Successfully Avoids $50 Billion in American Taxes” per Gizmodo.)

        • K says:

          See also “Elon Musk explains his extremely low tax rate” in The Hill. The parasites that run our country successfully avoided paying taxes as proposed this year. They have avoided paying taxes for DECADES. See “Corporate Tax Avoidance Remains Rampant Under New Tax Law” in itep.org.

          Of course, it is not just the trillionaire families’ companies that engage in billions of dollars in tax avoidance. Their pet billionaires and millionaires do the same things. How long will this continue?

          Will a stock market crash, when the Federal budget cannot be balanced without substantially increased taxes due to increased interest rates on rolled over treasuries, cause change? We will see.

        • JeffD says:

          “If rates were two percentage points higher, interest costs would total $750 billion, which is more than the federal governments spends on defense or Medicare. And at three percentage points higher, interest costs would total $975 billion”

          Then people better convert their financial assets and currencies to real assets as quickly as possible before the former become worthless.

    • Jackson Y says:

      Possible reasons:

      1) It was already announced well in advance. The post-Thanksgiving selloff was driven not by omicron, but because WSJ ran a story about speeding up the taper to $30B/month – the exact same pace that was formally announced today. By today’s press conference, the news was already priced in, and uncertainty was taken away.

      2) As of today, the Federal Open Market Operations desk is still buying bonds at a $105 billion per month rate, soon to be reduced to a $90 billion/month pace. QE is still going at full steam and will continue for another 3 months. There could be a selloff after QE finally ends, which would give Federal Reserve officials another excuse to delay rate increases.

      3) If the market does not sell off by then, it’s because a minuscule 0.75% increase simply doesn’t scare Wall Street. Real interest rates will still be deeply negative through next year. Hedge funds will still be borrowing trillions and speculating every last penny in the markets.

      • sunny129 says:

        S&P 500 trailing earnings PE ration is 40x compared to forward earnings (wishful numbers always high balled!) ) is 26x

        Buffett’s indicator Mkt cap to GDP is over 200%!

        Guess , all the reasons to keep buying, right?

        • Wisdom Seeker says:

          With inflation as a wildcard, the P/E ratio becomes meaningless: the future “E” becomes uncomputable.

          The future “GDP” is also uncomputable, rendering the Buffett indicator meaningless.

          P.S. There is no “keep buying” going on. There are no net buyers – every share of stock has both a seller and a buyer. Except for IPOs, secondaries (options grants…) and buybacks of course.

    • Sierra7 says:

      sunny129:
      If I recall correctly I believe Mr. Powell did say, “….we will continue to support the financial markets.”

  8. MiTurn says:

    My wife went to three different stores — a Walmart, a local chain grocery store, and a local non-chain grocery store — looking for Friskies-brand canned cat food in the case. No one had it — bare shelves. Not only crazy price increases, but supply-chain issues continue.

    • Goomee says:

      It’s the retired people stocking up.

    • ru82 says:

      Yep. Demand side supply chain issue again. Pet food makers are having record sales. I read sales are way up in 2020 and 2021.

    • Swamp Creature says:

      Talked to the manager at my local Giant grocery store. I was complaining about the shortage of essential items. He told me that they have a big problem with the supply chain. Major item missing was CAT FOOD!

  9. Xavier Caveat says:

    Palladium is used on all non electric cars in catalytic converters, really it’s main usage.

    Last year it was $3,000 per ounce, now it’s $1,500.

    In a world full of nasty inflation, it’s telling a story that new cars won’t be back en masse for quite awhile because of chip issues that aren’t going to be rectified anytime soon.

    • Wolf Richter says:

      The threat of EVs? EVs don’t have exhaust systems, and that’s the ONLY segment in the auto industry that is growing. All ICE segments are declining or collapsing (sedans).

      • Xavier Caveat says:

        EV’s are a miniscule part of the overall new car market now, maybe 5% of all new rides are electric.

        • Wolf Richter says:

          Yes, for automakers that’s the problem: the part that is growing in leaps and bounds is still only a small part, and the part that is in decline is the biggest part.

          But for exhaust system makers (and materials, such as palladium) the problem is that they’re are getting hit from both sides: from the plunge in overall auto sales (-20% to -30%), and from the decline in the share of ICE vehicles in the plunging overall auto sales. Each EV that is sold in this declining auto market is another exhaust system that doesn’t get built.

          Exhaust systems are on their slow way out. This is a declining industry. And the exuberance about palladium that led to the spikes in Feb 2020 and in May 2021 — when all this was already known — was just ridiculous. Palladium has come down by over 50% from those spikes but it’s still high compared to 2018.

        • Xavier Caveat says:

          Once upon a time 30 years ago Palladium was $100 an ounce and Platinum was $500 and catalytic converters only used Pt, and then once they made the switchover to Pd, it was off to the races from a spot price standpoint.

  10. sunny129 says:

    The answer to above questions will come on Friday (quadruple option expire ! o r on Monday when the real significance of Fed’s announcement, unless he is just jawboning, which one his tricks!?
    Inflation number next month will again put Fed on the spot!

  11. Jackson Y says:

    The Federal Reserve is going to drag out QE tapering for yet another 3-4 months. Meanwhile, December QE & January QE continue full steam ahead at $105 & $90 billion/month respectively. By next spring, unemployment could be in the 3’s and headline CPI could be above 7% (the tougher month/month comps start in the spring), and rates would still be at 0% or just starting to lift off at 0.25-0.5% — that’s all if the markets don’t crash & give central bankers another excuse to delay tightening.

    Any economist from even a few years ago would have thought this was complete lunacy.

    • WES says:

      The Fed is happy with the way things are.
      So they will talk, … and talk, ……… and talk.

    • Depth Charge says:

      When Jerome Powell announced more than a year ago that the FED was going to “let inflation run hot,” it should have immediately sent off alarm bells to CONgress and any human who has to work for a living. He should have immediately been called on it. Instead, CONgress ignored it, never questioned him, and human beings are paying the price for this intentional act of war on the standard of living.

      • historicus says:

        Who is the largest borrower in the World?
        Who empowers the Fed?

        Same answer.

        And that sir is the flaw in out system. Checks and Balances? Where?

      • Gilbert says:

        I would love to see a breakout of Fed employees. How many economists (and specialty) average pay and benefits. Other occupations?

    • gametv says:

      January is cut to $60 billion now.

      What people dont quite understand is that the Treasury also needs to sell at least 300 billion and maybe up to 500 billion of Treasuries in the coming month. So a reduction of $30 billion in the purchases is a tiny little amount compared to the mountain of additional debt issuance that needs to hit the market.

      So when you look at the full supply-demand picture for January, it is a much bigger change than the mere $30 billion reduction in bond purchases.

      That is why the Fed can not come out more aggressively to cut the bond purchases.

      My guess is that within the coming 4 weeks we are going to see some Treasury auctions with VERY tepid demand and that is going to cause interest rates to zoom higher.

      • sunny129 says:

        Mr Powell has assured liquidity with over night Repo Re-purchase of nearly ! Trillion each night. He is tapering in the front but can fill back any time there os liquidity squeeze.
        Only Things Fed cannot undo is supply chain problems, Omicron increasing in the coming months, Inflation expectations are deeply seated in consumers minds, as they see it, everday use items! Stocks still remain over valued by any criteria. China’s growth is slowing. Their Real Estate/Debt problems will hobble them, no matter how any can figure, how Mr Xi will solve them, under his own 3 RED lines!

        Those who cannot remember the past are condemed to repeat it
        -George Santayana

      • Jackson Y says:

        The period from mid-January to mid-February will be cut to $60 billion.

        You can see the time tables here. The amounts change in mid-month.

        https://www.newyorkfed.org/markets/domestic-market-operations/monetary-policy-implementation/treasury-securities/treasury-securities-operational-details

        This ends QE around mid-April, if the Federal Reserve doesn’t find another excuse to delay. This leaves May 4 as the earliest possible liftoff date. Most analysts are expecting June 15 or later.

        • Jackson Y says:

          Whoops, I goofed – under the latest time table, QE is scheduled to end in mid-March & not mid-April, as the $30 billion for mid-Feb to mid-March would be the last positive amount.

  12. Truth says:

    not sold out yet ?
    So again just another Skip the Rope Dump the Hump approch refusing to put out the Fire .
    Yes Grab the Paycheck in the sky fuled with Paper money and crush the masses to prep the downfall of the entire entire eccomney / houseing devaulation / biznesses of all sizes the Yamal Peninsula

  13. Depth Charge says:

    Jerome Powell knows that auto prices cannot increase over 40% again next year, so what he will do is point to the fact that the year over year increases are much smaller than the year before, thus proving his “transitory” prediction. That is how they are going to explain away their lack of action on inflation.

    But what that doesn’t account for is the fact that the massive initial increases in the price of everything are here to stay, NOT transitory, and that we will still be seeing inflation rates much higher than normal indefinitely. They will just continue to talk about the year over year increases being smaller, citing it as evidence inflation is waning.

  14. Michael Gorback says:

    Where’s the graph of the cost of getting laid? Drinks, dinner, rohypnol.

    • Enlightened Libertarian says:

      Viagra?

    • Wolf Richter says:

      Have those costs gone up?

      (I don’t know since I’ve been getting laid for 25 years as a fringe benefit for trying to be a serviceable husband).

      OK, I’ll probably have to send this comment to the Big Censor for deletion. Violation of some commenting guideline.

      • Michael Gorback says:

        Really? The price of shoes, jewelry, perfume, lotions, makeup, clothes and all the other costs haven’t haven’t changed?

        And then there’s the term SERVICEable.

        I think you’re confusing fringe benefits with gratuities. 😄😄

        • Wolf Richter says:

          serviceable in the sense of: not total trash, not useless, durable (such as a car that doesn’t constantly blow a fuse or break down).

      • Yort says:

        If the PC filters are off temporarily, my praise for future Time magazine HeRo JPOW:

        Let’s Go Jay-Don, Let’s Go Jay-Don, Let’s Go Jay-Don….HA

      • Ron says:

        About time lol

  15. phleep says:

    A country that would keep this print-and-debt circus going way wayyyy too long (with extra points for the mealy-mouthed bureaucratese being spoken), seems like one where, say, the elite insiders of public corporations would induce their companies to keep up buybacks, even as the insiders dump big lots of their shares (at share prices thusly inflated). It’s 3 card monte all the way down. (Versus, say, investing for the corporation’s future.) Sure, OK, in the long run we are all dead, grab and go. The suckers keep lining up and duly forking out cash. But my next question would be, what are these insiders doing with the cash, so derived? Where are they flipping that to? I want to grab some coattails! To the moon, baby!

  16. Swamp Creature says:

    Gas prices are the real show stopper for the Dems in the 2022 midterms. The polls show this. To mitigate this look for a federal price freeze on gasoline prices at the pump. Same as what Nixon did in 1971 when Connally the Treasury Sec installed wage and price controls. It worked to get tricky Dick re-elected by a landslide. Along with the price freeze, look for “MANDITORY ALLOCATION” of gasoline supplies. The Blue states will get all the gasoline they need or want, while the Red states will get shortages and rationing, resulting in gas lines. You can take this prediction and put it in the bank.

  17. Michael Engel says:

    1) RRP reached a new all time high @$1.621T.
    2) Fed gross assets minus RRP = Fed net assets.
    3) JP build up a war chest !!
    4) Somebody is in big troubles in the o/n market.

  18. Swamp Creature says:

    I just had a stray cat show up at my doorstop a few weeks ago. Beautiful Calico Cat. I started feeding it and now it’s showing up every morning and every afternoon, expecting a gormet meal. They better not run out of cat food or I’m in serious trouble.

  19. Yort says:

    It is well known that inflation is a regressive consumption tax, thus after looking at all of Wolf’s spiking “things and services” price charts…. I wonder how much the actual sales taxes, property taxes, registration taxes and other basic local and fed govt taxes are going to impact the poor, especially on non-discretionary items. I can’t seem to find any good charts showing the hyperbolic increase in “misc sales/services/ownership taxes” due to 10% annual Fed/Congress induced inflation.

    Some scholars say the Fed is attempting to inflate away debt, and unfortunately if so, such risks inflating away quality of living standards for a majority of citizens. And the Congress solution will be print more money and give it to the less fortunate, Fed solution will be print more money and give it to the rich, which ultimately spikes inflation ever higher. The Fed and Congress are trapped in a perpetual inflate and/or collapse scenario for the American Empire, and as such it is going to be a rough decade going forward as the Fed and Congress both attempt to extend and pretend to deal with the fiscal and monetary sins of the last 40 years…

    All this while many people have “real life threatening problems” like mile wide category 5 tornados travel 227 miles through their entire state. So thus the govt and Fed print more money so citizens can pull forward future consumption and screw the future generations, which only adds more carbon into the system to help speed up weather changes…but hey, we can always just print a few more trillion so mega corporations can build mega carbon capture machines that take mega energy sources that require mega natural resources that will somehow result in carbon magically disappearing in a “short” 50-100 years. Yes, I can’t wait for that IPO says Wall Street…HA

    What is the point of no return???

    • Sams says:

      The weather part is serious.
      I did read somewhere that the USA was two hurricanes away from it’s demise. The premise, if two mayor cities was destructed the same year by hurricanes, the economy would tank.

      • ru82 says:

        Hurricanes and Tornados usually end up juicing the economy from what I can tell unless you have a Katrina land in a City that was built below sea level. That was a disaster waiting to happen I remember reading in the early 90s about how it would eventually happen and it did.

        Lots of new money flows into the community to fix and upgrade the damaged buildings. Lots of free money from the government and then you have the insurance companies spending a lot of money too.

        Homes get face lifts and upgrades, people get new cars, and the local hardware stores sales go bonkers?

  20. Bob Jaynes says:

    I drove by a Toyota dealer a couple of days ago and took a picture of their lot. It was empty but for a few spaced out cars on the perimeter of the main road to make it look full. This won’t end well.

  21. Page88 says:

    There are various books about historical economic history that state when a country “prints money” (not concerned about deficit spending and running substantial debt), the results are less than neutral. The countries that did this for a period of time faced severe decline. Always.

    Countries that allow “kicking the can down the road” (not get their financial house in order) to continue is perplexing. The remedy to this situation is going to cause a lot of hurt.

  22. ru82 says:

    All the 12 packs of bubble water are still pretty much the same price except I now have noticed recently there is only 8 cans in the pack .

    Shrinkflation. ;)

  23. Cal says:

    It seems to me that were the 2020 dips added back as positives, that is, make up sales for the demand that disappeared, as though it had not disappeared, the numbers would be a lot higher than they are now.

    Use a ruler on the graph to see this in space.

    Something weird is happening on social media, it’s turning into a bazaar of cheap stuff for sale. This is what people put out on street corners with Free signs before. Ikea crap and dumb discretionary useless items like sports shirts.

    Also, many teenagers have come to our door or stopped us in the street asking for work dog walking, car washing, errands, gardening etc. This has not happened in half a century where we are.

    These are kids from well off families, brace straightened teeth, nice clothes, no callouses felt on hands after shaking them, home addresses in multi million dollar homes. (I ask a lot of questions).

    WTF is going on? Are we in an incipient depression?

  24. Lynn says:

    With online sales and maybe some others I wonder how much is being counted twice. There is a lot of retail “re-sale” going on. People are buying things up and reselling them at inflated prices. It’s nuts how much of that is going on. Even things like cardboard puzzles and costco chocolate. A $16 jar of costco chocolates is selling for $50 and $60 on Amazon right now. The company that makes it does not sell it on Amazon, nor does costco- only the resellers. Lots of re-sellers on ebay and etsy too.

  25. To tell the truth, I was amazed by this news but I think it was expected because there were many prerequisites for this situation. I can say that indicators of retail sales in November blew my mind and before this moment I hadn’t even suspected that we could see a record regarding this point. From my point of view, nowadays ecommerce is really relevant and in a huge demand. More and more people switch to ecommerce and give preference to online shopping because it has a lot of advantages. I think that we can always observe a sales growth in this sphere and this increase in sales by 20% is quite justified by many factors. I am certain that once the number of sales will reach a very high level and point.

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