Americans Not in the Mood for a Recession: Splurging on Goods, Flocking to Restaurants

But inflation is eating everyone’s lunch.

By Wolf Richter for WOLF STREET.

Retail sales in June jumped by 1.0% from May, and by 8.4% from a year ago, and by 32.5% from June 2019, to $681 billion, seasonally adjusted, the Census Bureau reported today.

Retail sales are sales of goods. Sales of services, such as insurance, healthcare, airline tickets, etc., are not included in retail sales. Ticket sales at the multiplex in the mall are not included in retail sales, but are services, and consumers have been shifting some spending back to services. And yet, consumers still splurged on goods. These folks are tough, when it comes to shopping. Nothing appears to be able to knock them down – not even the raging inflation.

Inflation rages in services, food, gasoline; recedes in durable goods.

Inflation is ricocheting around the economy. Where prices are now spiking are in services – but they’re not included in retail sales.

And prices are spiking in nondurable goods, dominated by food, gasoline, and supplies. These nondurable goods are sold at various categories of retailers, such as grocery stores, gas stations, general merchandise stores that sell food, supplies, and gasoline, at some “miscellaneous stores,” such as cannabis stores. But wait… cannabis products are not in the CPI basket.

But in durable goods, crazy-raging inflation of nearly 19% early this year has been abating and in June down to 8.4%. Retailers in that categories are stores that sell motor vehicles, auto parts, appliances, tools, electronics, furniture, etc.

Sales by category of retailer, not adjusted for inflation.

Sales at New and Used Vehicle and Parts Dealers, the largest category of retail sales, rose by 0.8% in June from May, to $128 billion, seasonally adjusted, and were unchanged from a year ago, but up 24% from June 2019, amid huge price increases in 2021 that are now flattening out. There was plenty of supply in used vehicles. But many new vehicle dealers were still woefully short on inventory, and consumers who want to purchase a vehicle are having to order it and wait for months.

But unit sales are way down from a year ago for both new and used vehicles. The number of new vehicles delivered to end users in June plunged by 13.5% from the beaten-down June 2021, to 1.13 million vehicles, and by 25% from June 2019.

The number of used vehicles delivered to retail customers in June fell by 13% year-over-year, according to Cox Automotive, as consumers are starting to rebel against the ridiculous price spike last year, and those price spikes have hit buyers’ resistance.

Sales at ecommerce and other “nonstore retailers,” the second largest category of retail sales, jumped by 2.2% in June from May, to a record $105 billion, and were up 9.6% year-over-year and up by 68% from June 2019. This includes the ecommerce operations of brick-and-mortar retailers, along with sales at stalls and markets. The ecommerce boom continues:

Food and Beverage Stores: Sales rose by 0.4% for the month, and by 7.1% year-over-year, to $78 billion. Compared to June 2019, sales were up by 23%:

Food services and drinking places: Sales at bars, restaurants, cafes, cafeterias, etc. jumped by 1.0% for the month, and by 13.4% year-over-year, to a record $86 billion. They’re in a boom, with sales up 33% from June 2019. Note that the year-over-year sales increase of 13.4% far outran the CPI for “food away from home” (7.7%). Americans are going out with a vengeance and are flocking to restaurants.

General merchandise stores: Sales ticked up 0.3% for the month, and by 2.4% from the stimulus-miracle last year, to $57 billion. Walmart and Costco are in this category, but not department stores. Compared to June 2019, sales are up by 18%:

Gas stations: Sales jumped by 3.6% for the month, and by 49% year-over-year, to $70 billion, on spiking gasoline prices, even while actual consumption, measured in volume, has dropped, as consumers are responding with changes in their driving patterns to cut fuel consumption and put a lid on their gasoline expenditures.

Actual gasoline consumption, in barrels per day, hadn’t gone anywhere since 2007. And now the price spikes have triggered a buyers’ strike. In the week through July 8, gasoline consumption plunged to 8.73 million barrels per day (four-week moving average), according to EIA data, a level first seen in July 1999

Building materials, garden supply and equipment stores: Sales fell by 0.9% for the month to $42 billion, but were still up by 6.4% from the stimulus miracle last year:

Clothing and accessory stores: Sales dipped 0.4% for the month and were flat year-over-year. At $26 billion, they were still up by 16% from June 2019:

Miscellaneous store retailers (includes cannabis stores): Sales jumped by 1.4% for the month, and by 15.1% year-over-year, to $15.7 billion. Compared to June 2019, sales were up 43%! This category tracks specialty stores, such as arts supplies stores, brewing supplies stores, and cannabis stores – now the hottest category in brick-and-mortar retail:

Furniture and home furnishing stores: Sales rose 1.4% for the month, and by 4.6% year-over-year, to $12 billion, and were up 22% from June 2019:

Department stores: sales fell 2.6% for the month, and by 2.9% year-over-year, to $11 billion. Compared to the peak in the year 2000, sales were down 44%, after numerous department store chains were liquidated in bankruptcy courts, and thousands of stores closed, and the surviving department store chains are still closing stores.

This chart, which goes back to 1992, shows the slow and methodical demise of what once was the quintessential way of shopping for Americans:

Sporting goods, hobby, book and music stores: Sales rose 0.8% for the month, and 2.7% year-over-year, to $9.2 billion, up 35% from June 2019:

Electronics and appliance stores: Sales ticked up 0.4% for the month, but were down 9.1% from the stimulus miracle a year ago. At $7.7 billion, sales were up just a tad from June 2019.

This segment covers only specialty electronics and appliance stores, such as Best Buy or Apple stores, not any of the other stores, such has Walmart, and ecommerce sites, where the vast majority of these goods are sold.

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  294 comments for “Americans Not in the Mood for a Recession: Splurging on Goods, Flocking to Restaurants

  1. Einhal says:

    I still don’t understand where all this money is coming from. Wages aren’t up enough to account for a 35% increase from 3 years ago.

    • Wolf Richter says:

      Lots of Americans HAVE lots of money. Lots of Americans EARN lots of money. Lots of Americans MADE a HUGE amount in stocks, cryptos, real estate, etc. — they made trillions of dollars, though they gave up some of it recently. And lots of Americans have little and make little. Those that can buy stuff, buy lots of stuff. That’s the American way.

      • Einhal says:

        If that’s true, and these numbers are being driven by asset gains among the top 20% or so, there is no way to get inflation under control without causing a massive drop in asset prices.

        Anyone who thinks the Fed can do the former without also doing the latter is deluding himself.

        • SS says:

          These are sales figure in Dollars. Can we get real sales figures in units?

        • Wolf Richter says:

          SS,

          Yes, on the big ticket items. RTGDFA

          But dollars are a “unit of account,” which is one of the three functions of a currency, and a huge convenience so you don’t have to count units and say that online retailer sold “16.578 trillion units” last month, ranging from USB connectors for $1.99 to Samsung Side-by-Side Refrigerators for $2,099. Counting diverse units for retail sales is idiotic. It makes sense on big ticket items of motor vehicles. But not across the board. That’s just stupid.

        • Augustus Frost says:

          I’d call the 81st to 90th percentiles in the wealth distribution part of the “mass affluent”. Much of their wealth is tied up in home equity or retirement accounts where it’s not readily accessible or expensive to access due to tax law.

          The number and proportion with a lot of readily available spending cash isn’t that substantial from this group, relative to their net worth.

          A high proportion of this group also live in high cost locations and can’t or aren’t in a position to save a lot of money.

          Also depends upon which top 20%, income or wealth, as not everyone is in both.

          Also depends upon household size. Two wage earners with a household income in the top 20% with dependents have a lot less discretionary income than a single person with none.

        • Harrold says:

          Cmon guys, this isn’t so hard. The top 10-20% have a lot of money. They buy what ever they want, when ever they want it.

          The middle 80% have credit cards, student loans and all other kinds of debt. They spend a lot on restaurants/bars, movies and gas because it’s cheap ish entertainment. They may have to cut back but they still spend on those services for as long as they can maintain a “fun” lifestyle.

          The bottom 20% or more live a free life of welfare, subsidized housing, etc… They still spend on restaurants/bars because they don’t need much for housing.

      • Kyrtsyn Podgajski says:

        Sorry, I thought this Retail Sales figure is not adjusted for inflation? Meaning that people just spent more, not that they bought more things. And if adjusted for inflation, isn’t Retail Sales actually lower?

        • Wolf Richter says:

          Kyrtsyn Podgajski,

          No.

          RTGDFA and not just the headline before commenting.

          It’s conceptually wrong to apply the overall CPI inflation rate (9.1%) to overall retail sales, and people who do that don’t know what they’re talking about.

          CPI inflation covers all categories or goods and services that consumers spend money on, including housing (spiking inflation), insurance (spiking inflation), healthcare (spiking inflation), etc.

          Retail sales covers retailers (businesses!), not products, and consumers spend only about 25% of their total spend at retailers. They spend the rest on services and at institutions that are not retailers.

          I discussed the inflation factors IN THE ARTICLE. I also have unit sales v. dollar sales for auto dealers and gas stations. RTGDFA

          For example, electronics retailers here sell consumer electronics. But consumer electronics had negative CPI, meaning prices fell. So you want to apply the overall CPI to electronics dealers? See what I’m saying.

          You cannot apply the overall CPI to sales at retailers.

        • Sams says:

          Well, depending on how you look at it, the concept of CPI itself might be wrong;)

          Wrong use of CPI is then just a follow on error.

      • Arya Stark says:

        Yup and high paying jobs are still plentiful. And based upon the Fed’s comments today they are gonna let it run hot. I’m expecting another big run up.

        • SS says:

          Wolf, my real estate agent was saying that market will heat up aging in 3 months simply because inflation will keep increasing and house price will inflate more than everything else like last year.

          What do you feel?

        • Wolf Richter says:

          Fire that real estate agent if you want to use them to BUY a property. But if you hired them to SELL your property, they’re doing a good job by spreading RE hype. But then, they might be unrealistic about the price, and you might not be able to sell your property, and then you will have to fire them anyway. So, I guess, just get it over with and fire them right now.

        • jon says:

          @SS: I called a real estate agent asking him: I have a house and I want to sell, is it a good time to sell ? He said yes because home prices are still hot and it can’t go up but down only, so best time to sell now.

          My friend called the same agent asking him if it is a good time to buy: The agent said, interest rates are still quite low historically and home prices won’t go down, may remain stagnant or go up, rates may go up and if it goes down, one can always refi. So best time to buy :-)

        • Phoenix_Ikki says:

          Haha replying to Jon’s comments since I can’t reply directly. I never knew RE agents are so good at playing both sides. I think we need more of them switch over to working for the CIA or become double agent.

        • Wolf Richter says:

          Arya Stark,

          The Fed said no such thing. They said they will raise by 75 basis points at the end of July. And they said they’re going to raise more afterwards.

          And the S&P 500 rose today, finally, after having dropped five days in a row. What else is new?

        • David Hall says:

          The 1% rise in June retail sales is in synch with the 1.3% seasonally adjusted month to month rise in the June CPI. That seems like 15% inflation after annualization. They are spending more to get nearly the same amount of goods, not increasing consumption of goods.

          From the 7/13 BLS CPI report:
          “The Consumer Price Index for All Urban Consumers (CPI-U) increased 1.3 percent in June on a seasonally adjusted basis after rising 1.0 percent in May, the U.S. Bureau of Labor Statistics reported today. Over the last 12 months, the all items index increased 9.1 percent before seasonal adjustment.”

        • Wolf Richter says:

          David Hall,

          People who try to compare total retail sales to headline CPI don’t know what they’re talking about.

          Retail sales are by retailer (businesses). CPI inflation is by product category.

          Retail sales cover only about 25% of consumer spending. The rest of what consumers spend is on services, including housing (spiking inflation), insurance (spiking inflation), healthcare (spiking inflation), etc., and spending at other institutions that are NOT retailers (prescriptions drugs at hospitals, etc.)

          It’s conceptually wrong to apply the overall CPI inflation rate to retail sales, and people who do that don’t know what they’re talking about.

          I discussed the inflation factors IN THE ARTICLE. I also have unit sales v. dollar sales for auto dealers and gas stations.

          For example, electronics retailers here sell consumer electronics. But consumer electronics had negative CPI, meaning prices fell. So you want to apply the overall CPI to electronics dealers? See what I’m saying.

          You cannot apply the overall CPI to sales at retailers.

        • Miller says:

          “based upon the Fed’s comments today they are gonna let it run hot.”

          The Fed didn’t imply that at all. Esp after the alarm bells sounded from the last CPI report the Fed made it clear it’s set to move even more aggressively than before to bring this inflation under control, Volcker style–runaway inflation wrecks economies and nations and it’s getting dangerously close to getting uncontrollable, crippling the dollar’s buying power. JPow and the team have no choice but to move in aggressively now. The Bank of Canada raised rates by 100 bp and this also flags a much more aggressive Fed move.

          “high paying jobs are still plentiful”
          In some sectors yes, others no. Silicon Valley and other smaller tech centers are moving to more-and-more hiring freezes as the latest tech bubble unwinds, even the FAANG’s. And part of the availability of such jobs to begin with is due to worsening labor shortages, partially due to labor force gaps from things like Americans getting sick with COVID or long COVID. Some sectors have plentiful such jobs simply due to them not being filled.

        • Depth Charge says:

          “The Fed said no such thing. They said they will raise by 75 basis points at the end of July.”

          Which just goes to show that Jerome Powell and Co. have absolutely no business still having jobs. They are completely incapable of doing the right thing, which would be to front load interest rate hikes massively to get ahead of inflation. I don’t think they have any intention of ever actually getting ahead of inflation. Jerome Powell is a traitor and a coward.

        • Sunny129 says:

          Arya Stark

          “The important number is Real Final Sales (RFS). It’s the true bottom line number for the economy. etail Sales Look Strong But Fail to Keep Up With Soaring Inflation

          A week ago, the GDPNow RFS estimate bounce to +1.3 percent from +0.3 percent. Today RFS settled lower at 1.0 percent.

          If RFS comes in negative for the quarter, the recession may have started in the first quarter.
          The July 15 update to the Atlanta Fed GDPNow Forecast shows a slight dip to -1.5 percent”
          (h/t Mishtalk)

          yesterday’s zoom of indexes could very well a ‘BEAR’ trap bounce!? Let’s wait n See

      • Erik Levy says:

        Exxxactly. We have become a country of 2 classes of people. It doesn’t look like it has slowed down one bit in my neighborhood in Capital Hill in Seattle, or in Queen Anne, or any other uppity neighborhood. The techno-successful 20/30-somethings are out in droves on Pike and Pine St spending $25 per tapas item EXCLUDING the 20% tip AUTOMATICALLY added and EXCLUDING the 10.25% sales tax. Compare that to what is going on in some other areas, it’s night and day.

        • PDX says:

          Great for the State of Washington and supports the local service economy.

          Probably different distribution now that many high earners work remotely.

        • Einhal says:

          Anecdotal, but I’ve heard from multiple successful 20/30 somethings that they don’t see our economy as sustainable, so they’d rather enjoy life while they can.

          That’s not a sign of confidence, but resignation as to a dark future.

        • unamused says:

          “That’s not a sign of confidence, but resignation as to a dark future.”

          They’re spending like there’s no tomorrow, expecting that someday soon there won’t be one.

          Plus they’ll never be able to afford a home, unless it’s retirement home after they’re done repaying their student loans, so there’s no point in saving up for one.

        • CrazyDoc says:

          Tried to make a reservation for a BDay party at three steakhouses this last weekend and no seating available both Friday and Saturday nights (eventually had to go with Sunday and was max packed) – busier than 2019 from what I can recall.

        • Brant Lee says:

          Good to hear about Capitol Hill and Queen Anne. This southern boy made some good money in the early 2000s doing remodeling in Seattle. It was the first housing boom and you could name your price. Only thing was that with my southern accent, some people asked what country I was from.

        • Flea says:

          This country has always been a 2 class system,first you immigrate ,then work your way up ladder. Then depending on choices ,spend money on wine women and song ,or you invest to get a better lifestyle.I did both and it’s turned out great

        • Miller says:

          @unamused:
          “Plus they’ll never be able to afford a home, unless it’s retirement home after they’re done repaying their student loans, so there’s no point in saving up for one.”

          There may be a lot of truth to this. Been seeing more Millennials and Zoomers in tech be less willing to build up savings and more wiling to sink into credit card debt, even higher earners living way beyond their means. Been talking to some STEM grads who otherwise have good prospects but many bring this up, the cost of homes is so ridiculous now while inflation removes their buying power, they see little value in patiently building up savings that won’t afford critical goods anyway. So why not spend and fall into debt anyway? Another example of the societal damage caused by this Everything Bubble (and housing bubble esp) from reckless Fed policy over the past decade and half.

        • Shiloh1 says:

          @Brant Lee
          I know some contractors on the SW side of Chicago/burbs who have affected an Irish brogue even though their grandparents/great grandparents came over here over 100 years ago. Marketing!

      • Erik Levy says:

        In terms of this just being the spending the cash from sales of inflated assets, this happens every cycle, but much more magnified now than ever before, and the smart money always seems to find a new venue, leaving a larger pool behind.

      • Gooberville Smack says:

        That makes sense. All the gamblers that have now cashed out are sitting on a nice stash to enjoy as they please. People that were depending on wages and refi’s not so much.
        If you were gambling in anything these past few years, either crypto, real estate, stocks, sports memorabilia, you could not lose. The only question is did you get out in time?

        • Augustus Frost says:

          Buying and selling in financial markets doesn’t increase the aggregate amount of cash in the economy. It only changes ownership.

          Rising asset prices incentivize those with appreciated assets to spend the cash they have, the psychological wealth effect.

        • Cyrus says:

          Augustus, have you heard of the fed?

        • Augustus Frost says:

          Cyrus,

          What does the FRB have to do with my post?

          Nothing to do with the Americans trading the same assets back and forth at higher prices while pretending it increases wealth.

      • Laurel says:

        We are way overdue for an asset recession (deflation). Labor and consumer price inflation can stay high. Demographics support it.

      • Jay says:

        I read a Salon article today SCREAMING for the Fed to stop raising rates or we risk tanking the entire economy into a massive jobs loss meltdown. The top 50% are going to fight this recession with everything they’ve got, and the bottom 50% are going to pay the price.

        Oh my goodness, the comedy of it all.

        • phleep says:

          Seems to me, from this article, folks with money are spending it, in ways that are trickling down to less fortunate workers. So it seems a comedy in maybe the old-fashioned sense of, a happy interval possible for awhile? I applaud those folks for spending so patriotically. I’m a contrarian. I like to have cash when times look bad. So, I play it cool when things look hot. This has worked, so far.

      • JK says:

        I agree Wolf. I know this guy whose daughter is a dentist, her husband an engineer. We were chatting on the ski lift and he talked about the great money they make together. Younger couple, I believe still under 30. If you got two people making good money, you can weather whatever storm.

        • Miller says:

          Unless divorce breaks up that high earning couple and one winds up paying crippling alimony and child support to the other, at least the way the US family law system is currently designed. Seen it happen countless times in state after state, even one of my best friends (a surgeon) got financially crushed by his divorce settlement. A skiing connoisseur himself Fwiw too, at least until the marriage fell apart.

        • eg says:

          Yup, Miller — divorce is for rich people.

      • andy says:

        Recession is definetly here. I only received four out of my six packages.

      • james says:

        I am one of those conspiracy theorists that thinks inflation is being miscalculated. So, adjusted for “conspiracy inflation,” these figures would be back at pre-pandemic levels, and real GDP would look like Venezuela in 2014. As hyperinflation unfolds, the real figures will portray total economic collapse, meanwhile these “nominal” headline numbers may portray growth. Having “LOTS” of money is meaningless when it has no purchasing power.

        • Sams says:

          First, inflation used to be defined as monetary inflation. The inflation number did then track inflation of money, in other words how much money that was created in a given timeframe.

          Then CPI, Consumer Price Index, came along. Note, index, not inflation in the name. Some, you could say the ruling class of econonomics, did chose to use the CPI as a measure of the inflation.

          The use of CPI as a measure of inflation do require that there is a strong coupling between inflation and CPI, that may or may not exist.

          If the coupling between inflation and CPI is weak, non existent or the CPI is strongly affected by other variables much of the economy theory as presented by central banks are wrong.

          Also numbers like the GDP make little sense then as the calculatios are «corrected» for «inflation».

      • Swamp Creature says:

        WR

        In short, the rich are doing fine. The middle and lower middle classes are getting hammered. The lower the income the worse it gets as inflation eats up all of their disposable income. The poor are now living out of their cars or in the streets. The US has turned into a third world s$ithole almost overnight. Just drive into the DC Swamp and you will see all of this right before your eyes.

      • Nick says:

        Nonsense! Only 6% of Americans make over $100k a year and a large % of then earn about $145k last time I googled it. The top 10% of the country is spending as you describe. Look at the average city or town. Look at the workers. For every doctor, lawyer, business owner, franchisee, upper manager etc. there are a hundred peons earning less than $20 an hour. The American way you talk of is when America had a burgeoning middle class.

        If my stats above are wrong then please argue otherwise. America is becoming a third world country. The hyper consumptive middle class is dying off and those surviving are living off the disastrous debt and credit system.

        • Wolf Richter says:

          You need to look at “household income” — not at individual wages and salary.

          So in 2020, income dropped because of the spike in unemployment. Incomes have surged in 2021 due to surging wages. But we don’t have the annual income figures yet for 2021.

          For example, in San Francisco the median “household income” in 2020 was $119,100 (Census). This means that 50% of the households had an income above $119,000.

          For Boston, in 2020, this figure was $76,000. For New York City, in 2020, this was $67,000. In Dallas, this was $54,700. In Miami, in 2020, this was $44,000.

      • B Bey says:

        A big flaw in your analysis…..retail sales are up, but so are retail unit costs. Consumers are spending more, but are buying a lot less product!

        You see the economy through an empirically distorted lens of the 10% wealthiest Americans. Inflation has hit the majority of American families who are living paycheck to paycheck

        There’s a reason why Walmart and Target has had ugly earnings misses recently. Shoppers are buying more necessity items like low margin groceries and less on store shelve products because of strained levels of discretionary income.

    • 2banana says:

      The credit cards still work!

      • Miller says:

        Yep, also been seeing a lot of credit card maxing even by some old friends who I used to associate with frugalness. Big part of what’s fueling this.

        • sunny129 says:

          Miller

          Exactly!

          There is significant increase in Consumers revolving (CCards) credit/debt. As purchasing any thing ‘Money and Credit’ are synonymous except for credit demands pays back along with interest and penalties!
          Bottom 50-60% (may be even more) look at life as YOLO and want to live it up. Bankruptcy is always, right?

    • Wisdom Seeker says:

      I’m with those saying the incentives today are skewed towards a “party-now, save-later” approach to life, at least for those who aren’t budget-stripped by inflation (yet).

      There’s no point in saving when inflation is killing the value of any savings, and the Fed’s not serious about stopping the inflation.

      And anyway there’s no point in investing those savings while the markets are all going down, banks pay very little interest, etc.

      Might as well party!

      Weimar Germany? Roaring 2020s?

      • RH says:

        Amen.

      • phleep says:

        > There’s no point in saving when inflation is killing the value of any savings

        I have to differ. the point is, survival. Survival is very underrated, apparently,if people are tossing cash to the wind.

        • Sams says:

          To survive cash flow is essential. In a debt based society survival is to keep the cash flow going as long as possible. Preferably to leaving this world. Leaving the world with a huge debt is rational, no repo man will come after you then;)

    • SOL says:

      If you’re a homeowner you basically won the lottery over the past 2 years. I have no idea what the average home equity gains were, but I’m guessing there were millions of people who had hundreds of thousands in gains.
      Just imagine if that many people were handed winning lottery tickets.
      Then there are those of us who were priced out of the market already and are now forever renters, and no winning lottery ticket.

      • Flea says:

        Move to flyover plenty of houses at 100 k

        • Cookdoggie says:

          Yeah that’s true. Talked with a manager at Jimmy Johns who is leaving Tacoma for Arkansas soon, due to high cost of living here. Said their new house on an acre cost $90k. I had no idea still that cheap in places. Sorry flyover, people are heading your way. Better buy more guns.

      • Old school says:

        That is true. It might all turn around quickly though. It’s kind of standard for leverage and foolish spending to be excessive right at the peak. Buying a house or a stock a year before the blowoff top can look very smart in one year and very foolish the next. Fed juicing assets looks like it went on at least a year too long.

      • Dazed And Confused says:

        It’s not over yet – wait and see what happens next.
        If the housing bubble deflates and prices return to pre-pandemic levels homeowners would just have been paying excessive property taxes for a few years.
        If they did a cash out refi they might be in a negative equity situation.
        Too soon to tell right now.

      • Wolf Richter says:

        SOL,

        “If you’re a homeowner you basically won the lottery over the past 2 years.”

        Not sure. If the price of your house that you bought in early 2022 tumbles 40% over the next few years, you sit on a big loss, and you cannot sell the house, but you’re financing that big loss with a cheap mortgage. But if you bought your house 10 years ago and refinanced the mortgage at 3% last year, then you won the lottery.

        • Dazed And Confused says:

          “But if you bought your house 10 years ago and refinanced the mortgage at 3% last year, then you won the lottery.”

          According to Freddie Mac, exactly 10 years ago in July 2012, the mortgage rate was 3.55% so if you refinanced it down to 3% then it’s a small saving that has likely been eaten up your increased property taxes and insurance.

          Bit of a stretch to call it “winning the lottery”

      • RemoteWorks says:

        > Then there are those of us who were priced out of the market already and are now forever renters, and no winning lottery ticket.

        Remote work + move to the midwest, buy a home with a lot where you can do permaculture => you turn the NIMBYs into your slaves instead of the other way around :-)

        You HAVE to make the NIMBYs work for you or your quality of life would decline.

    • sunny129 says:

      The top 10% have over 90% of Wall St wealth and the bottom 90% less than 7%.
      35% of the Consumer based (70%) consumption is by the top 10%-20%
      No wonder they can spurge without any restriction.

      Story on the bottom 80-90% is different. Majority don’t have $1000 in savings or $400 for an emergency! But, there is always the credit (CCards) right?
      The US personal savings rate is near a five-year low as pandemic fiscal stimulus savings run dry. The spending is supported by Consumer revolving credit (CCards) is highest level in decades.

      Biforked economy – Prieto rule 20% haves vs 80% have-nots. Just like in many developing Countries, more or less.

    • phillip jeffreys says:

      One source: consumer debt load has been rising steadily in 2022.

      Anecdotally: I visited a major mall in the Jacksonville, FL area yesterday. This place has been busy for mos. For the first time it was way short on foot traffic based on previous visits. I asked several of the shopkeepers ‘wazzup with dat” and each passed the same: slow down started a couple weeks ago.

      Could be Summer heat. Or not.

      • VintageVNvet says:

        Similar situation in the saintly part of tpa bay area pj.
        BRUTUL Heat far damn shore.
        Bottom priced, etc., still fairly busy, but definitely
        ”the season”
        to be somewhere else if you can

    • RemoteWorks says:

      Savings. Re restaurants and “They’re in a boom, with sales up 33% from June 2019” people can sense that the end is near given Climate Change, so they are spending savings now, giving up on ever having a retirement in 2-3 decades as the planet will not be livable by then.

      Everywhere you look you see signs of this collapse.

      • Happy1 says:

        Ha ha, like any of this remotely applies climate change.

      • somethingstinks says:

        So true…. I saw a TRex running down 101 yesterday, end is near, piss away all your money and wait for it!! /s

  2. Old Ghost says:

    Einhal wrote: “… these numbers are being driven by asset gains among the top 20% or so, there is no way to get inflation under control without causing a massive drop in asset prices.”

    Or they could tax the top 20%. But that might inconvenience some of the wrong people.

    I wonder how the BLET railroad strike scheduled for Monday affect some of these businesses?

    • Einhal says:

      You can’t tax this “wealth” because it’s not real wealth. It’s all a bubble.

      • Wisdom Seeker says:

        You can tax bubbles. Capital gains tax catches a lot.

        • Einhal says:

          Yes, if people sell. But much of the “wealth” is tied up in fantasy valuations of assets.

        • Sams says:

          Property tax have to be paid each year and market value is the taxable property in some countries. That is the wealt in financial papers are taxed as property belonging to owners. Tax value is equal to market value.

      • sunny129 says:

        Einhal

        It is NOT bubble if you had ‘cashed out’ 90% or more or cash out 50% and stay invested with uncorrelated including going against the mkts with puts and or inverse leveraged ETFs( always paired with their long counter part!

        I made a huge profit during GFC but lost most of it b/c I was dumb enough NOT to realize the powerful effect of ZRP+ 4 QEs+ Stimuli with Trillions thrown at the mkt by Fed by printing out of thin air. The debts now at record levels, unlike any time in human history.

        Reversion to the mean, in progress, with expected strong ‘re-bounces’ aka bear traps along the way. Gone thru more 1 bear since ’82. The coming one will be a lot worse b/c humongous debt levels here and all over the world.

        Nimble option traders don’t have to worry. Smart ‘swing’ trades can also cushion the effect of the bear. Made more during Bear mkts than during Bull ones!

        I have bought PUTs for the short/intermediate term and long leap calls, for the long term, adjusted periodically and under review. It is working fine.

        Most retail investors don’t know option trading or psychologically prepared or trained to against the mkt. They have been ‘pavloved’ by Fed’s put and siren song from the Wall ST that STOCKS always go up in the long term. If one analyses the recent mkt history by rolling 10 and or 20 yr performance, one has to be lucky enough to ride the bull and stay out during bear, which is virtually impossible.

        So most retail investors will end up holding the bags just like after dot com bust and GFC. The comfortable ‘group’ thinking also clouds and impacts the performance of most of Money managers, MFunds, investment banks and of course pension funds.

        We are in uncharted waters!

    • Augustus Frost says:

      Most of the top 20% aren’t wealthy. Most of them are already tax donkeys, unlike the .01%.

      I have a better idea. Why don’t you volunteer to pay a lot more tax since you think taxes aren’t high enough?

      There is nothing stopping anyone who agrees with your view from writing an extra check to the IRS at any time, over and over.

      • Mark says:

        “Most of the top 20% aren’t wealthy” yeh, right, sure.

        And Powell doesn’t have 85 million dollars stashed, right?

        Thanks for enlightening us.

        • Einhal says:

          The median net worth of the top 20% is $600,000, most of that in home equity or retirement accounts. Nowhere $85 million.

        • Augustus Frost says:

          You should get your facts straight next time before you display your ignorance.

          It’s maybe the top 5% that are “wealthy”. The rest of the top 20% are better described as the “mass affluent”.

        • elysianfield says:

          “The rest of the top 20% are better described as the “mass affluent”.

          Agustus,
          Spelling error…it’s spelled “effluent”….

        • Happy1 says:

          Not true. There is a large contingent of what some people call “HENRY”, high earnings, not rich yet. Most of the truly wealthy in the US are older, in their 60s and 70s. Lots of high earners in their 20s to 40s have far less than a million in net worth but still spend like a drunken sailor. And there is a massive difference between the 0.1% and even the 1%, generational wealth vs people with 5-10 million net worth.

        • VintageVNvet says:

          ”GET REAL” folks!!!
          ”OLD ” money folks do NOT care about any of this kind of ”market” BS/propaganda, and never have.
          Kinda sorta a challenge for those of us NOT part of that party…
          but kinda sorta need to ”get over it” for most of ”WE The PEOPLE”
          Unfortunately, similar to ”the poor”,,, ”the rich” are likely to be always with us and do SO much to ”challenge” WE the People that I would not doubt at all to see una make once again his very good ”rants” or better!!!

        • Happy1 says:

          Those who promulgate class warfare love to talk about “raising taxes on the wealthy” and “taxing billionaires”, but when push comes to shove, they actually tax the everyday people that most people see as the “rich”, the dentist or lawyer or business owner in the neighborhood who is a wage earner making 200-500K, these people pay the 30%+ rates while billionaires pay capital gain taxes or borrow against their wealth and pay nothing, or give money to foundations and pay nothing. The upper middle class gets the shaft. The truly rich skate free.

      • Flea says:

        They create foundations,which shelter income

      • eg says:

        AF, by definition a donation is not the same as taxation, and the latter is necessary for a host of priorities unrelated to revenue.

  3. Brendan says:

    Whaddaya mean the bar’s closing?!? Where’s the after party???

  4. Phoenix_Ikki says:

    Cool, looks like party on then Garth. Since recession is not happening anytime soon. Guess the hope for a housing crash can down to the drain as well. Wealth effect is still alive and kicking.

    • phleep says:

      Viva, wealth effect. We are all dancing above the abyss. Every balance sheet in the universe has a bottom somewhere.

    • Miller says:

      I’d say there’s a good chance for a recession in 1st half of 2023, just not as soon as some were predicting (for this year). The Fed has to move aggressively or inflation flies out of control, and that historically has crippled empires, great powers and nations more than any other economic disruption–a recession is just a speed bump by comparison, and the right “kind” of recession can be healthy longer term, by deflating asset bubbles and normalize prices closer to incomes. But no nation can survive its currency becoming more worthless to buy real goods and services without a huge civil collapse. Esp the US dollar, with the US having such a large trade deficit. Short sighted QT and ZIRP are the cause of the Everything Bubble in the first place, and the effects of their unwinding can only be resisted for so long. The housing bubble is already starting to pop in some US markets, though not nearly enough yet. Still, laws of basic economics dictate that they have to fall for the economy to be sustainable–in many markets, US real estate has gotten so stupid expensive that even top earning professionals and software engineers can’t afford decent homes, and so can’t afford to start families either. That’s not sustainable. Prices have to have some sane connection to incomes, otherwise it’s a bubble by definition, and some of the housing markets would have to fall more than 50 percent to be in line with incomes.

    • Old School says:

      It’s pretty clear from the data I have seen that people tend to spend and save at the wrong part of the cycle. People tend to leverage up late in the cycle in the gogo years and then stop spending and try to increase savings during recessions.

      It is understandable, but you probably end up with more money if you borrow and spend in a recession and build cash in go go times.

  5. LGC says:

    When inflation is raging (like ummm now), it’s better to buy stuff today than tomorrow. Because it will only be more expensive tomorrow. I think this is quite a bit of the goods upswing

  6. OutWest says:

    I always believed that Americans would binge-spend after the worst effects and restrictions from covid passed. I bought two new mountain bikes last month for my spouse and I, at least in part because it feels great to be out and about again. I rejoined my gym last month to lap swim under the sun and I’m hearing that members like me are coming back.

  7. Jackson Y says:

    Given the extremely strong data of the past few weeks (for June M/M: +372K NFP, +1.3/+0.7 CPI, +1.0% retail sales), why do Wall Street, the financial media, and the bond market continue to hammer this recession narrative day & night? The 10 year treasury yield can’t seem to hold above 3%.

    It’s clear the economy can withstand much higher rates. The markets just want to throw a tantrum.

    • Wolf Richter says:

      I agree. We’re going to get Q2 GDP soon, and it’s going to be a positive number. You cannot have a recession with this kind of spending, and a red-hot labor market. There may eventually be a recession, but not now.

      • Cyrus says:

        How will the final Q2 GDP numbers differ from the Atlanta Fed’s GDP Now tracker?

        What I mean is, does GDP Now’s current -1.2% Q2 move upward as it lags data over the next two weeks, or are there revisions in the works that will be applied retroactively to turn this -1.2% into a positive number? Both?

        • Wolf Richter says:

          GDPNow is a “nowcast” not a forecast and it’s not GDP. The GDPNow has nothing to do with actual GDP.

          The folks at the Atlanta Fed take the data as it shows up and put it into their model, and out comes GDPNow. The final version, which is released just a day or two before GDP, rarely matches GDP. In the past, it was way off, so often that I stopped paying attention to it. Sometimes it was way high, sometimes it was way low. Just random.

          So we can get actual GDP of +1.5% annualized and the final GDPNow of -1.2% the day before. No problem. This kind of stuff has happened many times.

          If there is a big disconnect, maybe it’s time for an article about it since this keeps coming up.

      • Phil m says:

        Wolf, just thinking about 2q being positive because of the red hot consumer spending. My first thought is how much of tbat spending is debt based. My second thought is to wonder what relevance a GDP print really is if it is so based on consumption as opposed to production? What is it really saying other than we spend alot ( in many cases money that we don’t have)

    • Peachy says:

      Jackson – “why do Wall Street, the financial media, and the bond market continue to hammer this recession narrative day & night?”

      Because for people spinning that narrative would have you believe that up is down and down is up. The narrative right now is that if we have a recession that means the Fed will stop hiking rates and restart QE, thus good for stocks. AKA recession = restart QE = stocks go up. Crazy right?
      This narrative is meant to dupe suckers into going long so the ones behind the narrative can cash out.

    • Miller says:

      “It’s clear the economy can withstand much higher rates. The markets just want to throw a tantrum.”

      Yep, this totally. The squawkers and Wall Street welfare beneficiaries are indeed throwing a tantrum and just like any toddler, they’re doing it to try to force their rich Daddy (the Fed) to give them even more candy that’s rotting their teeth and ruining their health for the next sugar high. Daddy Fed has stupidly given in to such tantrums constantly over the past 2 decades (last 40 years really), but that option is now over with inflation this high, and the whining Wall Street toddlers will have to deal with it. There likely is eventually a recession in the works from the necessary tightening (both with the interest rate hikes and esp QT) to break the back of this inflation, but it’s unlikely to happen this soon. Early in 2023 is much more likely, and it would be a cleansing recession to finally bring outrageous asset and goods prices closer in line with incomes, setting the stage for a strong recovery later in 2023.

      • Sams says:

        Can the economy withstand higher interest rates if that make rentier activity tax the economy even more?

        Note that with higher interest rates more money go to rentiers.

    • Blondie says:

      Too much of our economy like many other things in this country is influenced and driven by the news media. If you tell people the same thing time and time again they will soon accept and believe it. Sad but true.

  8. DR DOOM says:

    Retail sales blew right threw the Fed’s pissy little rate increases. This retail gobbling bunch will eat the Fed’s slow rolling QT scheme as a snack. These well heeled retail warrior’s with also gave the Fed the bird to boot. 30% inflation will not stop these retail battle hardened veterans. If you can’t run with the big dogs stay under the porch. By the way, I am under the porch,woof …woof.

  9. Marbles says:

    It’s kind of like handling cattle. First, you have to gather them, then you get them to move in the right direction. But eventually they will test you, and the fun begins. Too little control and you lose them. Too much control can end up the same way. Raising rates to control inflation amounts to the same thing. The second time around, it gets serious. Best to do it right the first time. I doubt they’re up to it.

    • phleep says:

      I’s like pivoting an aircraft carrier, except one ten thousandtimes the size of any carrier, ever.

    • historicus says:

      Yep …. 12 cowboys can run a cattle drive of thousands of cattle.
      BTW, ‘How many members of the FOMC?”

  10. Rodger Dodger says:

    Interesting headline, as I was just at my local family diner and it was practically dead, during the lunch hour. Only 2-3 tables occupied.

    Listening to the waitresses talking to others, it had been slow all day.

    I explained I hadn’t been in for a while because my once a week treat has been reduced to once a month.

    Not a lot of foot traffic in touristy old town either.

    • Wolf Richter says:

      Go to a restaurant that is thriving, not one that is dying. Restaurants have life cycles, and they die, even the successful ones.

      • Rodger Dodger says:

        It had been slow during COVID but was picking up earlier this year.

        One Sunday morning about six weeks ago I had to pitch-hit as a bus boy, as every table was full and only one waitress had showed up to work. Two more wait staff eventually showed up and I left once the backlog was gone.

        Recently they have been busy on Friday’s at lunch time.

        But this is also the place where people get sticker shock when they get their bill. We have one of the highest minimum wages in the nation.

      • Gomp says:

        Nobody goes to that restaurant anymore. It’s too crowded.

      • Lauren says:

        Sounds like an interesting topic to write about, if you haven’t already.

      • SomethingStinks says:

        Tell me about it…. One of the best pizza places I have ever eaten at is Giordanos in Chicago. When we moved to Phoenix, we found a Giordanos in the suburbs, just as good as the Chicago restaurant!! They closed permanently this February. We ordered regularly throughout the pandemic and not once did they mess up an order. Why they would close is a mystery, now I will have to go to Chicago to get that pizza. Given the state of Chicago, looks like I am not going to eat at Giordanos ever again.

  11. Brady Boyd says:

    Let’s see how long this will last if the stock markets & cryptos implode along with massive layoffs. The hungry, who will also be very angry and resentful will be waiting for the restaurant goers and shoppers leaving to go home.

    • Jack X says:

      I think Americans can’t admit being broke, just like their Gov 31 trillion in debt, the fake image has to be maintained, so load up on debt, the guard rails (the banks) are just non existent to curb dangerous debt. Deja vue.

      I think ya correct & will add, most people in restaurants today will be jobless, homeless & hungry themselves.

    • Jackson Y says:

      I don’t think the markets matter that much to the real economy, to be quite honest. 2000-2002 was a textbook example of a market meltdown that didn’t bring down the economy. While the NASDAQ tanked by 90%, full-year GDP growth was positive for all 3 years, and unemployment peaked around 6%.

      • Apple says:

        It’s hard for people to conceptualize a recession that has no job losses. But I think that is what is occurring right now.

        • Wolf Richter says:

          Except it won’t be called a “recession.” The NBER calls out recessions, and it uses a variety of metrics in its decision, including several labor market metrics. GDP itself is a pretty lousy metric for the economy, everyone agrees on that. So that’s why a recession needs to come with weakness beyond GDP, such as declines in employment, major increases in unemployment claims, etc.

      • VintageVNvet says:

        just to be clear JY,,,
        that crash when ronnyrat came into POTUS was a very devastating ”crash” for some of us…
        back in those days,, going at least back to FDR,,, every, repeat EVERY ”administration” wanted to make sure, as in damn sure,,,
        that everyone in USA knew very well where, as in what political party, the money came from.
        So, while modern folks want to make something bad or worse about ”the other party”,,,, fact IS that both ”parties” are in the biz of screwing the workers.
        Other wise,,, both ”parties” would start voting in our Congress for laws and regulations that would help the folks who actually produce our wealth, rather than those who ”financialize” our wealth to rob us.
        Pretty clear at this point in time,,, only question is IF this clear robbery of ”workers” will stop.

    • cd says:

      the stock market is not going to implode….

      • Scott Falke says:

        Agree…100%

        The market will slowly deflate…slow enough, with enough rallies, to keep people from panicking.

      • Max Power says:

        Hold on… The Fed has only started dipping its tows into QT. Combine that with seasonal factors associated with tax collections and the impact of QT on the economy has been very muted so far. Let’s wait and see what Sept./Oct. brings.

  12. Jack X says:

    This will end in a depression, the banks are giving anyone with a pulse massive credit & people are having one last splurge in total denial.

    I don’t think for one second it’s spending from gains, no chance. This is massive debt creation, zero standards, defaults will explode, will make 2007 look small.

    People living in fantasy land, the US is already in recession & soon a depression.

    • Cd says:

      that is bs. I work for a CRA, people are getting denied with bad credit, underwriting has tightened. DTI and PTI are now focused numbers

      • Jack X says:

        It’s not bs, 8 yr car loans, defaults skyrocketing, millions unable to pay mortgage or rent, the credit ratings ain’t worth anything after the last two years, everyone had a massive bump higher in ratings due to payment holidays & no missed payments.

        So everyone has a fake credit rating & all this crazy crazy spending is proof, they can’t pay that back, ya can’t get this amount of spending unless something fundamental changed & I know it’s lending standards being non existent, knew it in 2007 & know it now.

    • Random guy 62 says:

      I try to balance my natural pessimism with other views but my small little slice of flyover and our business are my primary window to the world. And I’m with you.

      Our business tends to follow pretty closely the economic sentiment of the country at large. The story of 2021 was of massive demand, but with high costs. The story of 2022 is of cooling costs, and rapidly cooling demand.

      Our order rates are abysmal for July so far, and things are usually pretty steady. If the second half mirrors the first, it will be the lowest order month in over a decade. Only worse ones in ‘09/10. Backlog is still strong enough to take about 2 months of that, but not more.

      Raw material prices spiked just before the Great Recession, only to be followed immediately by dropping through the floor with the crash. We are seeing that commodity movement rhyme right now.

      Our scrap buyer is a pretty big operation, and they said no one even wants their metals right now. No buyers. Price is low. This is good because the high metal prices killed us in 2021, but if orders for durables drop, it’s just as big of a big mess too.

      We have a deep layoff list ready. If orders stay at this level for another 6 weeks, layoffs will hit our place hard and fast. Hoping it doesn’t come to that.

      Just spoke with a lawyer and banker at a property closing two weeks ago. Both said real estate activity has completely vanished in our little patch. Lawyer was doing 10-12 closings per week. He said it’s barely 1-2 now.

      Our story isn’t necessarily the story of everywhere. Who knows.

    • Phil says:

      Just because you’re depressive doesn’t mean the rest of America is. The economy has cycles of boom and bust, but right now we have the strongest currency in the world and people are spending it. Employment is at record highs and people are happy to be out and about after two years of pandemic malaise. There’s always doomers and they’re rarely right.

  13. Poor like you says:

    Never underestimate the resilience of the American consumer. I think of all the financial suffering coming, the USA will end up suffering the least of the world, collectively speaking.

    • Einhal says:

      From where does the American consumer get its “resilience?” Certainly not from collective production!

  14. John says:

    I was in a Home Goods store this Friday morning, it looked like Christmas. The women seemed to be panic buying doo-dads and knick-knacks.

  15. Jeff Tidd says:

    Wow, up 32% from 2019? That’s bonkers. You have commented specifically in the past regarding the extremes occurring in the auto market. Combined with the historically hot labor market, crazy housing market, etc, and the much-feared “recession”, if it occurs, may just be the economy reverting to historical means…

  16. unamused says:

    Lenin believed Britain would colonize itself out of existence, Germany would militarize itself out of existence, and the US would spend itself out of existence.

    His grave is a communist plot.

  17. Crush the Peasants! says:

    The war is over (for now). People are happy to be able to be out and about.

  18. Ben Sargent says:

    Yep don’t see a recession soon as mentioned by Wolf months ago. Employment too strong.
    Plenty of cash from the previous reduction in interest rates.
    Lots of cash ready to go back into stocks i think as well.

    • cd says:

      you bet because its mid terms and a distinct pattern is rolling now into bullish time frames

      all the hype on recession and doom probably scared a lot of new money players out, old school folks just bought the dip and are now about to get richer….

      their is no slow down in lower middle class thru the rich…

    • Wolf Richter says:

      Cash cannot “go back into stocks.” That’s impossible. For each buyer that must be a seller. Someone puts cash into the market (the buyer), then someone else is taking cash out of the market (the seller).

      All they can do is change the buying pressure or the selling pressure.

  19. John says:

    So the European Union is starting unlimited bond buying next week per Bloomberg. Isn’t that QE 2.0 again?

    • Bruce says:

      It is but you are not aloud to call it that

    • Wolf Richter says:

      John,

      You misread this completely.

      If yields diverge too much, for example between Germany and Italy, the ECB may shed German bonds to raise German yields, and buy Italian bonds to lower Italian yields. Or they may shed German bonds faster than they shed Italian bonds. The goal is to keep the spread between them somewhere in the acceptable range.

      The ECB can do QT on this basis just fine, and they will do QT, but unevenly to keep the yield spread within bounds.

    • David Hall says:

      A headline from two days ago:

      “ Chinese Lehman moment as “jingle mail” arrives”

      They built too many half finished towers.

  20. Michael Engel says:

    1) Total retail sales made a new all time high, but the spread between the
    last three dots is a thud, to be confirmed. // For entertainment only :
    2) SPX weekly failed to close above June 20 despite the higher efforts.
    3) NDX weekly : a hammer, an inside bar, on higher volume. Last week had only 4TD.
    4) NDX weekly : June 13 was a spring. The spring job is to send NDX above the previous high. After four weeks NDX failed to breach May 31 high. // June 21 white bar closed > June 13 high. June 21, a setup bar. June 27 higher high, a trigger. There is no close above the trigger high. There is no close under the trigger low.
    5) NDX daily : since June 16 low most of the activity was in the upper half. It reached about 50% of the move from Jun 2 high to the bottom.
    6) NDX daily : today bar was the smallest bar in the last two weeks, on a higher volume, under dma50, under a downtrend line coming from
    June 2 to July 8 highs, under the red cloud, but above T&K of the cloud. NDX weekly entered T&K.
    7) NDX might be tempted to penetrate the sexy groove above.

    • Petunia says:

      Why do you keep doing these postings? The era of financialization is over, nobody cares about this stuff anymore. Markets are dead.

      • phleep says:

        People were doing charts long before “the era of financialization.” (Not that I do it.) But I reckon, picking a figure as arbitrary as any other, that “era” started with the commencement of the USA. That’s why (real) history books are never “over.”

        It does matter what stocks do, versus dollars, versus real estate, versus commodities. “Era of financialization” or none. People still steer value through time: definition of finance.

        • Petunia says:

          Historically, market data reflected actual transacted values. Now they make this shit up, and not just in a few areas, it’s everywhere, all manipulated crap. Dark pools, HFT, buybacks, repos, sdr’s, cpi, ppi, all made up crap to siphon off your money.

          Nobody cares.

        • VintageVNvet says:

          Could not agree more Pet.
          Somehow and some when, WE, as in the entire population of earth WE, will/must ”take back”
          OUR world from the folks who appear to be ONLY at and IN the ”financialization” of OUR productions of value.

      • SoCalBeachDude says:

        There is nothing ‘dead’ about markets whatsoever, and they are more alive than ever and now effectively doing price discovery with a lot of volatility and divergence among opinions as to the future of the US and global economies.

      • phillip jeffreys says:

        Agree with your comment vis manipulation. The data is not trustworthy. Better expressed, the components of the metrics and the metrics that are chosen change to meet political objectives. As do many accounting standards.

  21. Kyrtsyn Podgajski says:

    I really think you are wrong on your take on this number Wolf…

    Are you saying the WSJ is wrong here? Look, they have a chart that shows the retail sales number adjusted for inflation.

    https://www.wsj.com/articles/retail-sales-june-rose-consumers-inflation-11657833254?mod=hp_lead_pos3

    • Wolf Richter says:

      “Are you saying the WSJ is wrong here?”

      YES. The author is a young reporter, a few years out of college, with a BA in journalism (2016), and knows nothing about how any of this stuff works. I have called out the BS written by young reporters in the WSJ a bunch of times. They got rid of all their grizzled editors that would have caught this, and these young clueless reporters write whatever.

      So give it up. READ my comment. RTGDFA, because it explains ALL THIS. You clearly cannot make yourself read my stuff. So be it.

      • Krystyn Podgajski says:

        Well here is a bet then. You said that GDP will come in positive because of this “strong spending”. I do not think it is strong because I think it is all inflation, so I say GDP will be zero or negative. If GDP is positive I will donate you your website. If it is zero or negative you acknowledge I was right on a post. Deal?

      • Max Power says:

        Yeah, the WSJ can make pretty egregious errors. Case in point… a few weeks ago their main editorial article was a piece praising the recently-elected Republican governor for allowing the creation of university-sponsored charter schools, to supplement (and supposedly compete against) existing school district sponsored charter schools).

        The main thrust of the editorial was that the governor did this as a way of getting around existing collective-bargaining restrictions associated with the state’s ‘evil’ teacher unions.

        The only problem is that Virginia has neither public-sector collective bargaining, nor teacher unions. These have been outlawed in the commonwealth for a long time. Although the outgoing Democrat governor did sign a bill that authorized the optional formation of separate teacher unions in the 100+ districts in the state, this happened very recently and it will take many years for such unions to actually organize and begin to collectively bargain – if that even happens at all (I’d say there’s a high likelihood that it won’t).

        The WSJ has a few really good reporters (which yes, do tend to be older and more experienced) but also a bunch of really crappy ones.

        • phillip jeffreys says:

          Good thing there is not a Virginia Professional Educators or a Fairfax Education Association then…eh?

        • Max Power says:

          @ phillip jeffreys, the organizations you list are voluntary and to which only a fraction of teachers belong to. They do not perform collective bargaining. Maybe they will someday, but they currently do not. The WSJ article was clear that the main reason for the establishment of the new type of charter schools was to circumvent restrictions in the existing collective bargaining agreements which is not true.

      • SoCalBeachDude says:

        GDP for the second quarter 2022 appears that it will be NEGATIVE BY AROUND 1.5% YET AGAIN according to GDPNOW and here in Southern California stores are NEARLY EMPTY including restaurants, grocery stores, big box stores, discount stores and everything else.

        • Wolf Richter says:

          San Francisco is packed with tourists, and it’s hard to get into restaurants. So maybe everyone went north?

        • Phil says:

          I was just in the west Palm Beach, and Miami area, and the crowds were incredible. Hard to believe does are empty elsewhere.

        • rojogrande says:

          Thousand Oaks seems to be doing fine. I haven’t noticed any drop off in traffic when I shop or go out to eat. Grocery stores tend to retain traffic in any economic conditions, though the buying patterns may shift. Maybe it’s just where you live.

        • Wolf Richter says:

          I went to our Costco earlier today.MAYHEM!! People buying no matter what. Prices up like crazy, and people are still buying like there’s no tomorrow.

    • Shiloh1 says:

      Many WSJ writers (and A.M Best, S&P) were just fine with AIG right until it collapsed in 2008. Likewise with Reliance Insurance Co. around 2000. Hack WSJ insurance expert Leslie Scism will give the roadkill play-by-play as it appears in the rear view mirror.

  22. Petunia says:

    I’m spending because after years of austerity everything needs replacing. So far, I’m replacing clothing, phone, sheets, towels, pillows, kitchenware, tires, etc. All the everyday items are just plain worn out. Whatever it costs to replace what I need is what I have to spend. My spending is way up for the year.

    • SoCalBeachDude says:

      I would suggest you LOOK FOR QUALITY on things you buy in the future as they are much cheaper over the long run that buying the cheapest stuff.

  23. Not Sure says:

    I’ve been trying to wrap my head around just how much money was created (not earned) in the last couple years, and I don’t think the human brain is really capable of actually understanding what a trillion of something is, much less several trillion.

    Our money supply increased from ~$15 trillion to ~$22 trillion in 2 years. Nearly a third of dollars were created in 2 years! As much as were created during the entire already crazy previous decade of QE. That’s just nuts, a truly mind-boggling mountain of dollars. Some gets tied up in reverse repos, a lot is yet to be spent by the government, some went right into circulation, some is still getting lent out at historically low rates. Anyway around it, there is still just a huge amount of money sloshing around in this economy looking for something to buy. Clearly, those dollars are still chasing goods and services as evidenced by this article. I just don’t see this relenting while the job market is still red hot and the Fed is still taking their time with incremental adjustments. Markets may creak and groan, but how would we get a recession with so many millions of job openings and so many trillions of new dollars still looking for a purpose? The fed is so woefully behind the curve, I have to question if they have any real control over the situation at all.

    • cd says:

      and its why scared money is not going to make money….
      their are trillions of dollars floating around waiting to be spent, it makes 2008-12 QE look like pre school lesson

    • Roger Pedactor says:

      And demand for USD has never been higher. DXY is a wrecking ball right now.

      Despite insane amounts of DXY printed, the global economy is dying for more.

      I don’t really know what to make of it. I mean the Euro is falling apart and the JCB is hari-kari with the Yen right now!

      • phleep says:

        Flight to quality sounds ludicrous if it is to the USA, until one ponders what a hash the other economies have made of their situations. And they keep up a PR front. I don’t see how some countries are holding together at all.

        But the US dollar definitely has its risks. An open system, no capital controls, well, the Brits had that. Their attempts to cling to that (in a gold standard) finally became a series of failures with big impact on their people. Luckily we did not hang ourselves too long on a cross of gold. Now the dollar can float and flex and not crack.

        An open system is what insures the survival of network effects. It takes an awful lot of dollars. It buys everything on the planet every day. It has been hard to print ourselves into enough trouble, yet.

        Our openness is being studied by every starving “student” worldwide to find hacking vectors.

        • Sams says:

          Try buying Russian natural gas from the pipeline in Europe with US dollars;)

          The risk is that those exporting natural resources want controll over payment exchange rate.

      • Rowen says:

        YouTube the dollar milkshake theory.

        When a borrower takes a USD loan or issues a USD bond, it is effectively shorting the USD. When that USD debt can’t be rolled over (when interest rates increase), borrowers need to raise dollars to service existing, usually by selling USD assets (stocks, bonds) or forex intervention, and creating a squeeze on USD. And since global trade is settled in USD… see Sri Lanka fuel crisis.

        Fun times.

    • SocalJohn says:

      Good post NS. Waaaaay too much fiat sloshing around.

    • phillip jeffreys says:

      Why the low LFPR?

      Your concerns about money printing/ZIRP are entirely on point. It has been in play for quite a while. Basically turned one asset class after another into speculative casinos divorced from market forces.

      And what’s not to love about Modern Monetary Theory! It’s practical application has worked in Japan!

    • eg says:

      Central banks abandoned tying their rates to monetary aggregates decades ago for a reason.

      And the aggregate without any consideration of the differential propensity to save/consume across the income/wealth distribution isn’t very useful.

    • cb says:

      Not Sure said: “Our money supply increased from ~$15 trillion to ~$22 trillion in 2 years. ”
      ————————————–
      I have seen $5 Trillion, even $10 Trillion, but I have not seen numbers as large as you are claiming. Where or how did you come up with 15 to 20 Trillion? which is quite a large range by the way.

      What do you think Wolf?

  24. Beardawg says:

    This is astonishing. I mean everyone has their anecdotal experiences, but $$$ is just flying around all over. With as much as was dumped into the economy from 2020-2022, I bet this inflation could keep rolling another 2 years.

  25. The argument has been made by so-called “monetary experts” that when a currency is experiencing raging inflation (i.e. debasement), then there is no point in holding it anymore. So, you spend it out of existence. After all, what is the point of saving dollars if $100 in 2000 is now worth $50 in 2022? This is how hyperinflation sets in. So, Wolf’s comment about people spending a lot of money despite raging inflation could be amended to read people are spending a lot of money BECAUSE of raging inflation.

    Personally, I don’t believe the U.S. will experience hyper-inflation, but holding cash is getting more painful these days. That being said, as I have stated many times, if you don’t keep some powder dry in the form of cash or near-cash, then you will miss some “once in a generation” buying opportunities, whether it be in the stock market, the housing market, etc.

  26. unamused says:

    Inflation is the economy’s way of saying your money supply is greater than the quantity of products and services available for consumption, and is a function of income inequality. The bottom 80% are not driving inflation. They’re following it.

    We’re testing our hypotheses against those historical inflationary periods for which we have adequate data, however marginal, and so few it’s unlikely we could ever raise it to the status of a theory. That paucity is the likely result of economics having been relegated to the role of public relations service for the Financial Industrial Complex post-WWII. Our modeling confirms our earlier supposition that interest rate and QT policies will be quite unable to either reduce inflation to moderate levels, say, 2%/year, or to prevent severe recession.

    To say that economics is a soft science is an understatement. It’s positively squishy because there’s so many variables and non-linear relationships.

    World population is expected to exceed eight billion next year, mostly people who need too much and aren’t going to get it but also including a couple of billion who want too much and aren’t going to get it. Crop failures are projected to double two or three times in the next few years with no prospect of eventual recovery. My selection of Dirges commemorating the Coming Population Crash includes ‘Would’ by Alice in Chains and ‘Whipping Post’ by the Allman Brothers.

    People would be well-advised to focus their purchasing on productive items conducive to collective survival in isolated cooperatives, but hey, I’m not going to tell you what to do.

    • SocalJohn says:

      Sometimes I feel like I’m dying…

    • VintageVNvet says:

      Una: ”To say that economics is a soft science is an understatement. It’s positively squishy because there’s so many variables and non-linear relationships.”
      Is very polite, but the stone cold hard fact is that economics is exactly the same as other ”social sciences” are not science at all, same as it was when I got my degree in such stuff 50 years ago, mostly just listening in class and parroting back the same stuff on tests/papers, etc.
      All of them are simply aggregated opinions that have received the blessing of whatever/whoever is the current pope and similar.
      The very clear and equally abject recent failures of reality results of actions of FRB and it’s plethora of PhD. type folks is a stirling example.
      The equally dismal results of ”criminology” ( as opposed to criminalistics) is another glaring example.
      ”Psychology?” HAH!

      • unamused says:

        ‘”Psychology?” HAH!’

        The disciples of Edward Bernays have you exactly where they want you, in line for your exsanguination. And just because that science-y stuff confuses you doesn’t mean it’s wrong.

    • Phil says:

      This post, and in my opinion, often Wolf’s thesis, overlooks the supply shock caused by covid 19. I still think that this blog understates the effect of the supply side of the equation, and I still expect the supply shocks to be transitory, to resurrect a much maligned term from 2021. When I can walk onto a Honda lot and look at current models, and buy one that day and drive off with it, I’ll be more interested in what the inflationary mindset is responsible for. At this point I still believe that the pandemic, and the supply disruptions caused by it, as well as the pent up emotional YOLO mindset as a result, are all far more interesting than the inflationary mindset.

      • VintageVNvet says:

        Agree P:
        Some ”stuff” temporarily high and higher and higher, far damn shore…
        Other stuff may actually seek and find new lows, low prices and low availability, as we are seeing, ”sometimes” and with some goods.
        Later, as we saw very clearly in the after effects of the gas/oil shocks 50 or so years ago,,, some products were no longer available at any price.

  27. TK says:

    If retail sales are up 1 plus 8.4 equals 9.4% then we are just keeping up with inflation. Kinda like we are in denial and just buying like always. At some point the credit users will hit the limit and then we slide toward less buying. I have a barometer. 2 relatives did a major kitchen upgrade last year at 50k and 70k. They rationalize that home prices will always go up and home equity loans are cheap. Ironically they can’t cook much differently than before, but they are keeping up with trends – black cabinets yuck. Bottom line, people like to spend, it makes them happy. At some point it won’t be so easy. Then I shall buy good stocks at low prices. I think it will be October.

  28. .
    .
    .
    Red hot iron takes a while to cool.

    Expect the chill to be noticeable in October, as rate increases and QT start to bite.
    .
    .
    .

    • Not Sure says:

      1/3rd of all dollars were created from the founding of the currency until the GFC. The next 3rd were created from the GFC until 2020. The last 3rd were created in the last 2 years… Again, 1/3rd of all dollars were created in just 2 years!

      It’s going to take more than a few months to burn through enough cash to see a cooling of inflation, a meaningful reduction in job openings, and thus a chill in the economy. At the end of the day, the money supply has to be suited to the size of the economy. Rate hikes and QT will continue to make markets wobbly, but to see fast results in consumer spending, the Fed would have to deploy their balance sheet’s anti-dollars much faster than they’re planning to.

      • unamused says:

        “Again, 1/3rd of all dollars were created in just 2 years!”

        No wonder you have raging inflation. And still the dollar is so strong it’s crushing everybody else.

        Why would they do that?

        Perhaps Our Illustrious Blogger can explain.

        You wouldn’t like my explanation because it’s going to come off like another doomsday scenario.

        • phillip jeffreys says:

          Hoping BRICS+ changes that!

        • Venkarel says:

          I would remind you of the asian financial crisis in the nineties and its’ relavance to today’s situation. Then ask yourself if the FED sees this as a feature or bug.

        • cb says:

          Unamused said: “Perhaps Our Illustrious Blogger can explain.”
          ———————————–

          Yes Wolf, we really do need a primer on money supply. In these comments, “Not Sure” is claiming 15 to 20 trillion created in the last couple of years and 45 to 60 trillion existing. Much larger than other estimates.

  29. Anthony says:

    The good news is that with retail sales being so strong, with inflation at 9.1%, with so many jobs being available, that interest rates will at last start to go up at a decent rate. I would like to see it up to 6% as soon as possible and up to 9% by Christmas. Only then will sanity arrive.

    Speaking of sanity, food prices. I was speaking to a member of the staff at my local Lidl and on average they have put stuff up around the 25% mark for the last year. Most of the food I buy has gone up at least 25% and sometimes more and that is before the effects on this years food supply. I know, as I’ve lived through it before, that inflation is a beast that is very hard to control and has to be beaten down very hard.

    As inflation is so high around the world, it has to be stopped, I can see the same thing happening as of the 1970’s and that is assets stop rising. They will stay flat for long periods, maybe ten years at least. So, the wealth created by the stock market boom will have to stay flat for the same ten years. Get used to it. It’s coming to a country near you.

    Just to point a small thing out… Retail sales are up, the stock market, Crypto and house prices are down.

    Oh, I don’t know if it means much but many of the farmers in the USA are very twitchy this year, in many ways similar to the 1930s.( a period, as well, where the Germans and the Russians hated each other…go figure) Hopefully not like the 1930s…but life is often ruined and run over by cycles. lol

    • Dazed And Confused says:

      Anthony wrote:

      “Retail sales are up, the stock market, Crypto and house prices are down”

      House prices are not down yet – at least not in the USA.

  30. Bull&Bear says:

    Wolf,

    If the yield curve gets inverted, does that mean that FED does not roll over the long term bonds/mortgages fast enough? Could it be that after the QT goes full speed we would still see inverted yield curve?

  31. Lautaro says:

    Inflation doesn’t reduce spending in fact it increases it.
    If your ice cream is melting you eat it ASAP, you don’t wait until it’s completely melt.

    • SocalJimObjects says:

      This is a very American attitude. Also why can’t you put the ice cream in the freezer so you can have it next time?

      Muppets.

      • phillip jeffreys says:

        Cuz you can’t freeze inflation?

        • SocalJimObjects says:

          Well you can do one better. You can stop buying!!! And then there will be demand destruction. And then prices would come down.

    • cb says:

      Brilliantly put, even if SocalJimObjects won’t accept ti.

  32. Ben says:

    Wolf: I RTGDFA twice. You did not address the issue of nominal vs real retail sales. Even Robert Hughes at AIER (MA in Economics among other qualifications) clearly stated today that real retail sales has decreased, although he did deflate by CPI. You have a very compelling point that nominal retail sales cannot be appropriately deflated by CPI, but there has not been a compelling argument presented that nominal retail sales should not be deflated to determine if there has been a decrease.

    • Max Power says:

      I think Wolf’s point is that once you break out sales to individual components and you wanted to show deflated and undeflated figures then you’d need to show deflated figures deflated with that specific component’s price index, rather than comparing to overall CPI which is what so many commenters are suggesting.

      • unamused says:

        “you’d need to show deflated figures deflated with that specific component’s price index”

        And where do we find these inflation figures for specific components?

        Inquiring minds want to know!

    • Wolf Richter says:

      Ben,

      There is NO DATA to show if inflation in the specific goods that make up retail sales was higher or lower overall than sales growth. People who try to show that are making stuff up.

      So we cannot say whether in real terms retail sales rose or fell — and that’s not even the job of this data. The job of this data is to look at retailers, not consumers.

      We’re going to get consumer spending data that is adjusted for CPI. We just have to wait for that.

      We do know from this data here that consumers spent a shitload of money.

  33. historicus says:

    All this demonstrates just how far behind the curve the Fed is…..
    and the foot dragging suggests they foster this condition.
    Quite a recession with restaurants packed, hotels and resort areas packed, warm weather destinations for the coming winter full. In the areas I would entertain moving to, little inventory and still fully priced.
    House replacement costs still extremely high.

    As for the Fed…..
    “Procrastination is irresponsible and likely deceit.” D Bonhoeffer

    “It is absurd to put important decision making into the hands of those who pay no price for being wrong.” T Sowell

    “In a system that boasts of “checks and balances”, who checks the Fed.” Me

    • Dazed And Confused says:

      historicus wrote:

      “House replacement costs still extremely high”

      I’ve been pondering why Texas (particularly Austin and Dallas) seems to have some of the biggest pandemic-era housing bubbles. Obviously, there was a ton of domestic migration, and the supply of new housing was curtailed by shortages of building materials, appliances et al.

      But it’s also true that Texan houses are huge with massive quantities of embedded materials and the labor used to assemble them. The value of Texan houses is mostly in the building structure not the land it occupies unlike say coastal California.

      Just like used vehicles the structure itself should depreciate as it ages while the land values should increase. But the extreme excessive pandemic-era stimulus has upended that assumption so that the used buildings and vehicles are now appreciating just like the land.

      This might at least partially explain why Texas skipped the last housing bubble but is ground zero for this one.

      • Flea says:

        Most people haven’t been to these cities in summer BRUTALITY Hot

      • Old School says:

        I keep watching tiny home builder in TN on YouTube. He has been building tiny homes for 8 years. He keeps modifying the business as customers tell him what they want. Here are some of the things he has learned:

        1. Customer is mostly 50 plus single women.
        2. Customer wants you to provide the developed lot at a low lease rate $200 -$300 monthly rent.
        3. Customer wants about 200 – 300 sq ft.
        4. Customer wants to be part of a community.
        5. Customer needs a price point in the $50,000 -$80,000 range.
        6. Customer is not someone from the area.

        Business is growing faster than he can keep up as he doesn’t use any debt. Up to 70 employees, which has doubled in a year or so. Six months back log of orders.

        • cb says:

          @ Old School –

          What is the name of this builder and what area does he operate in? It sounds like the customer is buying the structure but renting the land it sits on………… correct? dangerous for the customer

      • Anthony A. says:

        “But it’s also true that Texan houses are huge with massive quantities of embedded materials and the labor used to assemble them.”

        Of the 437 houses in my Texas neighborhood, the sizes range from 1,700 to 2,800 square feet. I’ve lived in CA, CT, MI, FL, and now TX and the houses are no bigger here in TX than any other state. And the materials of construction are essentially the same.

        Our labor of construction used to be pretty reasonable, and maybe less costly that in CA for example, but now it has caught up in hourly costs.

        Yeah, everything is bigger in Texas

      • Shiloh1 says:

        Austin and Dallas are the cities that moneyed out-of-staters heard of.

        • El Katz says:

          And Austin and Dallas are where employers fleeing CA relocated (Toyota to Dallas as one example) which brings the attitude that homes are “cheap” in TX.

          My son lives near the Domain in AUS. His house “value” is now over $1.1M on a home that needs… a lot. The land could likely be sold for more if the house wasn’t on it.

  34. phleep says:

    The casual response of the public is conditioned by decades of the Fed put (rescue, insurance, bailouts, whatever). A consumer does not need to be aware of the Fed, to act in this overall climate of expectations. One day though, the Fed may reach into its magic hat and find no rabbit in there.

  35. Michael Engel says:

    1) Fist bumps, knuckles bumps, shaolin tiger bumps.
    2) VT and the Bronx bumped, because the knuckles flipped around 180 degrees for a quick upper cut and a kick.
    3) US fist will shield the ME.
    4) NATO expansion, shaolin deterrent against aggressors.

  36. JoshWx says:

    I feel like there are a few factors potentially contributing to inflation that have gotten glossed over recently. A) the scores of homeowners that refinanced at rock bottom rates. Millions of people now have hundreds of dollars/month of extra spending money. B) student loan freeze. Millions more have been saving hundreds (thousands in some cases) per month. C) lingering psychological effects of the lockdowns. Tell people to stay home for a year and effectively reduce spending and they all return with a spending vengeance from hell once reopening begins. Who knows when this cools off but lingering fears over future covid surges might continue to propel abnormally high spending in the short term.

    • Dazed And Confused says:

      (A) is partially offset by increased homeownership costs e.g. increased property taxes due to massive home price appreciation (not CA obviously), increased insurance and maintenance/repair costs etc.

      (B) will that freeze ever end or will it become permanent forgiveness?

      (C) state-by-state data might help quantify the impact of this one. TX has been pretty much completely open and back to normal for almost 2 years while CA was much more restricted until recently. Country comparisons might also help.

  37. rick m says:

    Don’t know why I got deleted. Kinda touchy lately, perhaps. Beware the Wolf.

    • nefff says:

      well rickm, far be it for a humble lowly serf like me to presume why “the wolf” would delete a comment, but if i had to venture a guess, look somewhere between RTGDFA and Dont $#!* on the sidewalk…

    • Wolf Richter says:

      Because we’re not going to get a Hitler thread started here. And you sure baited one.

      In general, this is not a history site. If you want to retell your version of what happened 100 years ago, and draw fancy parallels to it, do it somewhere else.

      Commenting guideline #10

      https://wolfstreet.com/2017/10/07/finally-my-guidelines-for-commenting/

      • otishertz says:

        The moderation is the main reason I spend time reading comments here. I don’t mind being moderated either, because I am an immoderate person. And sometimes I like to get an inappropriate laugh.

        I hope you can keep up the moderation. I’ve tried to moderate a blog and it is whack-a-mole with a plastic squeaky shit splaying hammer from the dollar store. No win time suck.

      • 91B20 1stCav (AUS) says:

        rick m/Wolf/nefff/otishz-sounds like ‘RTGDCG’ might require addition to the site acronym dictionary…

        may we all find a better day (mwafabd).

  38. Winston says:

    Eat, drink, and be merry, for tomorrow we (figuratively) die.

    • phleep says:

      Big question is when, and on what path. Essence of strategy and all financial decisions. Many possible paths are some degree of non-catastrophic.

      I’m grateful that, win or lose, I can apply my style and values to my situation: a dividend of the land of the free. And in California, I’m especially grateful there is a cap on property tax rises, else I would be cast out on that costs-rise treadmill so many are on.

      • unamused says:

        “Many possible paths are some degree of non-catastrophic.”

        How are the probably paths looking?

        I have a cartoon of a guy in a tattered suit in a cave sitting by a campfire, explaining to some children that “Yes, the planet got destroyed, but for a beautiful moment in time we created a lot of value for shareholders.”

        Well, I thought it was funny.

    • Sams says:

      Yes, and after peoples death the bank can get no money back:)

    • VintageVNvet says:

      W,
      this is a very very misunderstood/misunderestimated quote:
      Actual quote is, ”Eat, drink, and be merry/married,,, for tomorrow WE DINE.” The married part being at least a very very clearly helpful part of the successes of democracy of ”World War 2.”
      These successes are clear and extensively documented in the ”historical fictions” of many folks very well qualified to speak of such things from direct experience.
      Some oligarchy, or at least hopeful of that, folks have used the negative one of that quote to emphasize the ”dogma” used to make their peasants/slaves/serfs be more ok/docile/comfortable with the more modern
      ”propaganda/brain washing”==== ”leash”,,, AKA control, rather than the whip / spear / gun, etc., formerly used.
      Folks might understand more by reading ALL the his story and now HER story coming these days from myriad sources regarding WE the PEONs transitioning from clearly known slaves/serfs to ”wage slaves” and other similar descriptions.
      Some differences, music availability for one, being much more ”equitably available.”
      MOST ”net benefit(s)” have just migrated to back to the oligarchy since the ”bonus” to WE the PEONs for saving their ass-ets with our deaths and other service in WW2.
      Time and enough to at least try to bring solid and lasting balance to at least try to help long range policies and procedures to provide perpetual peace and plenty,,,
      Hopefully PRIOR to WE ALL GO POOF,,,

  39. nsa says:

    “Splurging on Goods, Flocking to Restaurants”
    Rational behavior when inflation is 10% plus and the local bank is paying 1.5% APY on a 13 month CD and 2.0% APY on a 30 month CD…..taxable adding insult to injury.

    • unamused says:

      Adding fuel to the fire. Which isn’t going to die out until you run out of fuel because America’s favourite coping mechanism is to spend money in the misguided attempt to spike their endorphins a bit.

    • Old school says:

      I don’t know about that. Maybe rational behavior is to adjust standard of living down or get income up to keep up with inflation. Buying because inflation is running hot does seem to rational to me.

  40. Michael Engel says:

    Dear Petunia, skip : SPX might test one more time June 17 low, close under 3,775. Add another column of “O”, before moving up, adding more columns.
    Lot’s of “X” and “O” accumulation since May 12 low.
    For your entertainment only, because u don’t care.

  41. CreditGB says:

    Maybe already asked, forgive me if so.
    “Retail sales in June jumped by 1.0% from May, and by 8.4% from a year ago, and by 32.5% from June 2019”

    In terms of daily shopping for all kinds of products, in the real world, the above “jumps” are just about the inflationary price increases we’ve seen.

    Asking cause I don’t know: How much of this retail sales “jump” is the increased prices being paid?

    • Wolf Richter says:

      No one knows. Huge discussion above about this. This data doesn’t tell you. You cannot apply CPI rates to retail sales because retail sales cover only 25% of consumer spending, and this data covers SALES by retailers, it’s a report on RETAILERS, not consumers. And CPI is a report on price increases by product category. But retailers sell many product categories.

      To get CPI-adjusted consumer spending data, we have to wait until the consumer spending data comes out, which I always cover.

      • David Hall says:

        You may need to look at the CPI categories item by item. Food at home prices rose 12.2% compared to June 2021. Food prices may be a component of retail sales.

        Some professor on CNBC said something like inflation is going away. I have not seen that in the data yet. I know the price of aluminum was relatively stable for decades, but college tuition rose. I can not see where the stock market will be in September or where inflation will be next year. A Hershey chocolate bar was five cents during the Vietnam War. Now it is over $1.50 in some places. Inflation is variable, but constant over the long term.

      • jm says:

        Alas, though with today’s bar-scanner checkout and inventory management systems it would be feasible to know not only exactly what was sold, but also how much of it was sold last year, last quarter, last month, etc., and what the actual prices were, and probably the percent margins, too, and to integrate this data for all retailers of significant size, no one aggregates all that data,

        • Sams says:

          Well, here there was a row when the gouvernment statistical office requested to have all those sales data…

        • VintageVNvet says:

          DIS agree jm, but ONLY with the no one aggregates part!
          IMO, retired out of retail sales these days, but with many former decades,
          ;;THEY”’ have it, at every level of aggregation and national and regional and state/province and municipality and postal/zip code and even maybe, by now, by street and block…
          THEY just don’t want to share it with any of WE the PEONs who have not been invited to the party.

  42. Rico says:

    It’s possible the Fed is going to need a shock and awe bomb to extinguish inflation.
    Which could produce some type of financial collapse with no bailout.
    A big QT dump? They have a huge arsenal of destructive tools.

    • Old school says:

      If you believe Steve Hanke inflation is going to run very high for another year based on what is already baked in the cake. Fed will lose credibility if they don’t try to fight it and the big risk is they over do it and put us in a hard recession. They made the big policy mistake last year and Fed has got to get the market’s confidence back that they know what they are doing.

    • Flea says:

      It’s coming from overleveraged companies,that borrowed up the wazoo to buy back shares . Enriching executives,what a scam .But now rising rates could sink a lot of ships .Examples Ford,Disney,maybe Ge. This is why kelloggs is splitting into 3 units been happening a lot .Or some leveraged hedge funds blow up .Crypyo might be nuclear ask Najarian brothers who haven’t been on cnbc since geyying called out on national tv

  43. Michael Engel says:

    SPX : 500pts down to 3,350-3,400 might shock them.

  44. Michael Engel says:

    S-wave option : Feb 2020 high to Mar 2020 low, up to 4,800, a round trip to Feb 2020 high.
    Verified by : SPX PnF : x3, x 33.333. Five columns x 100 = 500 down.

  45. NARmageddon says:

    It is remarkable that gasoline sales (volume) is down but retail and restaurants (dollars) are up. But on 2nd thought I think the reason is that poor people burn quite a lot of gasoline normally, and what we are seeing is they are cutting back more than rich people are burning more.

    Some years ago I visited S. Korea for few days and I noticed they had both volume and pricing of beef and pork and other commodities (esp. imports) on the front page of some (English language, business-oriented) newspaper. That impression stuck with me. Perhaps something that US news outlets should also report regularly.

    (ties in with the discussion above about what kinds of goods have volume reports in the US, such as cars, etc).

  46. Michael Engel says:

    1) Almost 45,000 home owners in China are not in the mood to pay
    mortgage loans, after RE developers defaulted on 230 projects in 86 cities.
    2) Chines banks shut their doors. Saver who lost their money are protesting in the streets.
    3) RE sales in China are down 76%.
    4) The Grave Dancer might buy project in china, finish and stabilize them.

    • Wolf Richter says:

      Michael Engel,

      Do you realize that these are mortgage loans on unfinished or barely started apartment buildings? In China, builders finance construction costs by pre-selling apartments, and lenders lend using these non-existing apartments in unfinished or barely started buildings as collateral, and that’s fine until the builders collapse, which is now happening, and there are doubts that these buildings will ever be finished. So the question arises: Why should I pay for something I may never get?

      RE development in China is now a huge mess.

      • Flea says:

        I wonder how much money world lent to China,=bonds won’t get repaid

      • Michael Engel says:

        yes I do. Buyers finance construction co, but when the market
        turn south the buyers own a skeleton, an empty shell. It can stay empty for decades.

      • jm says:

        Horrifyingly, it appears that they not only may lose their pre-payments, but are also already on the hook for mortgage payments on home never completed — in many cases not even started.

        For the first 20 years of my 50-year association with Japan, all I heard was that real estate could only go up, and that if you could possibly afford to buy you absolutely must, or be priced out forever, Then in the early ;90s on a business trip to Japan a friend offered to drive out to Narita to give me a ride into the city, telling me not to worry, he and his wife would enjoy the ride. On the way back in, he mentioned that they were thinking of buying a condo, but had decide to wait a few years, when prices would be lower. I will never, ever forget that moment. Quintessentially, the end of an era. A few years before other friends had paid a hundred million yen for a suburban condo of about a thousand square feet (about 800k late 1980s dollars, mind you). A decade later similar condos could be bought for around $300k,

        FOMO/TINA psychology is like Humpty Dumpty. Once broken, it’s done for.

  47. The Falcon says:

    The Great American Consumers are a massive pack of rabid hyenas on a 24/7 relentless hunt for the next kill/purchase. Hyenas who hunt not just to satisfy basic needs but also deep-rooted conscious and unconcious psychological needs that go far beyond the basic. It’s these psychological needs that are in great part driving them to sign on the line which is dotted to buy buy buy at whatever absurd escalated price they must pay to get what they “need”.

    I’ve always said don’t be surprised at the lengths the Great American Consumers will go to, but even I am entering into the Surprised Zone. It takes my breath away.

  48. unamused says:

    “things like RussiaGate were proven false and Hunter Laptop finally being advertised as legit”

    Fox News sponsors surveys to make sure its viewers are even less informed than people who do no news at all, and are otherwise properly disinformed.

    Lucky for you there are remedies for gaslighting.

  49. Michael Engel says:

    1) Sept 11, Feb 24 invasion, July 8 Abe assassination.
    2) 127 millions Japanese are no longer in the mood for pacifism and blackmails.
    3) Japan might amend their old constitution, increase the defense budget well above 1%, to strengthen it’s military, to improve the economy and deter threats from aggressors.
    4) At the same time maintain good relationship with neighbors from Kamchatka, China, Korea, Indonesia, Vietnam, Australia, India and the ME..to compete with china silk.
    5) While China in troubles, Japan, #3 behind US and China GDP, following the footsteps of her icon, have a chance.
    6) In the 1980’s R/R punished Japan for flirting with China, offering them
    a fist full of dollars. That led to Tokyo RE bubble and the Nikk collapse.
    7) Sharing high tech, US is interested that our best friends are powerful
    enough to protect themselves, along with us.

    • Konstantin_Bukharov says:

      Kamchatka is a Russian peninsula. Russia recently put Japan in the list of hostile countries and announced that all negotiations about peace agreement (no peace agreement between R and J since WW2) or Kuril Islands are closed.
      Korea – S. Korea – ok. N. Korea is hostile to Japan.
      China is obviously not a Japan friend. Never was, never will be. There were celebrations in China after Abe’s assassination.

      p.s. I hope I didn’t violate the rules. Just brought some info to Mr. Michael Engel for consideration. One can’t built the house on false basement.

      • Michael Engel says:

        Konstantin Bukharov, Russia isn’t US enemy. Russia is a medium to unite 32 European nations. China isn’t US enemy. China is a tool to unite nations against China….to create deterrence.
        Abe was friendly to both Japan’s friends and enemies. traveling all over the globe, forming the Quad. Without deterrence it cannot be done.

      • Michael Engel says:

        When Japan surrendered USSR got their leftover : Kamchatka, Sakhalin, the Kuril Is… USSR RE stretched from Tokyo to Berlin.

        • VintageVNvet says:

          EXACTLY correct ME, and, ”surprise”,,, even somewhat
          SUCCINCT… BRAVO!
          And only for entertainment purposes:
          USSR really and truly HAD the opportunity with the total control of that RE to make a HUGE LEAP towards true global democracy and equality.
          Clearly, USSR did NOT make that leap and is gone.
          Also Clearly, in my hopium, is that ALL of our species will sooner than later understand our many challenges but mostly to quit ”peeing in our own nest” SO much as to severely limit our time on ”this here round thingy”

        • VintageVNvet says:

          OK, OK, for those complaining:
          ”OBLATE SPHEROID”

        • 91B20 1stCav (AUS) says:

          VVNV-asan old geographer, i thank you for that clarification!

          may we all find a better day.

      • Old Ghost says:

        Konstantin_Bukharov wrote: “Kamchatka is a Russian peninsula.’

        Indeed. Very few Americans can find Ukraine on the map. I think even fewer have heard of Kamchatka. And they certainly could not find it on a map.

        The poster ME is someone is someone I usually skip over.

    • Not sure if that makes sense or is the disjointed assertions of a primitive AI?

      Are you self aware?

  50. Jerzy Guy says:

    So question #1 – IS the Fed the Uvalde Police Department?

    Question #2 – Is understood that the Fed owns about 25% of the mortgages right now. Are those mortgage the garbage mortgage from this speculative bubble, that in previous bubble went into the CDO bonds (bankers learned not to buy garbage mortgage bonds from this experience), and even earlier bubble that those garbage mortgage were kept in the books of the S&L (bankers learned to get rid of them asap from this experience).

    In short is QE? another device to eat up bad mortgage and make them go poof without consequence to banking gangters?

    • Wolf Richter says:

      The Fed owns only MBS that are guaranteed by the taxpayers (Fannie Mae, Freddie Mac, VA, etc.). If there are any losses on the underlying mortgages, the taxpayers will make all investors in the MBS, including the Fed and your bond fund, whole. Taxpayers won’t mind. They won’t even pay attention. They’ll be busy with other stuff.

      • sunny129 says:

        That’s why I am very slowly and in small increments accumulating the following ETFs (warning: NOT a recommendation. Due diligence required)

        Agency bonds – AGZ, GNMA and CMBS
        others with increased risk include PLW ( staggered bond 1-30 yr) and CWB.
        All picked by me by going thru Yahoo/Finance, like I do most of stocks/ETFs. There are more others if one researches
        All are NEGATIVE YTD but div/yields IMHO may cushion the coming Bear Some may perceive these as as ‘speculative’!

        Wolf; If this violates your Blog-standard, feel free to delete this

        • Wolf Richter says:

          No problem. It only violates some kinda guideline if you start repeating the same recommendation.

        • sunny129 says:

          Wolf

          thank you and duly noted

        • NARmageddon says:

          sunny129,

          According to iShares dotcom, the GNMA ETF yield is

          >30 Day SEC Yield as of Jul 14, 2022 2.10%
          >Weighted Avg Maturity as of Jul 14, 2022 7.95 yrs

          On that same day (14th) GNMA closed at $45.70, below Friday (15th) closing $45.875. Meaning that current yield likely is a tad more than 2.10% (I guess the exact yield today depends on what GNMA ETF bought/sold/matured in the one day in between, but seems unlikely that the yield changed significantly).

          On that same day (Friday 15t), the US 10yr is trading at 2.93% yield. That’s a pretty big step up from 2.10% for a mere 2.05 years difference in maturity.

          So, the question then is, is it likely that USG10 will drop more in value than GNMA-7.95 as interest rates in general increase. My guess is that it will NOT, but I would like to hear your analysis.

          To me it does not look like GNMA compared with USG10 is a good deal at the current price.

      • NARmageddon says:

        From https://www.finra.org/investors/mortgage-backed-securities

        Bonds issued or guaranteed by federal agencies such as the Government National Mortgage Association (Ginnie Mae) are backed by the “full faith and credit of the U.S. government,” just like Treasuries. This is an unconditional commitment to pay interest payments, and to return the principal investment in full to you when a debt security reaches maturity.

        Bond Risk Profile: Credit and default risk are real for MBSs issued by GSEs: The federal government is under no contractual obligation to save a GSE from default.

        ———————————————————————————————

        Comment: Generally speaking, Wall St is conflating Government Agencies with GSE, redefining GSE as “agency”, and pretending that GSE mortgage bond guarantees are backed by USG. They are not.

        • Wolf Richter says:

          NARmageddon,

          The GSEs operate under conservatorship of the US government — have been since the financial crisis — and therefore their guarantees are like government guarantees.

          From the FHFA:

          “FHFA has been able to operate the conservatorships and avoid putting each Enterprise into receivership because the U.S. Department of the Treasury has made commitments of financial support to Fannie Mae and Freddie Mac in the form of Senior Preferred Stock Purchase Agreements. Those commitments ensure that the Treasury will provide investments in the Enterprises so that each remains solvent and can continue to provide liquidity and stability to the mortgage market, despite its lack of risk capital.”

          https://www.fhfa.gov/Conservatorship/Pages/History-of-Fannie-Mae–Freddie-Conservatorships.aspx

        • NARmageddon says:

          Wolf,

          The link “commitments of financial support” just leads to the press release page of the FHFA. I have been unable to find any contractual language or a law that confirms that “conservatorship = guarantee” in the case of the GSE. If anyone can find the contract or the law passed I’ll be happy to read it.

      • cb says:

        wolf said: “MBS that are guaranteed by the taxpayers (Fannie Mae, Freddie Mac, VA, etc.).”
        ——————————————–
        This is another travesty that destroys free markets, wildly inflates the cost of housing and picks winners and losers and creates and widens the wealth gap. It is a crux of a debt slave economy and is anti-freedom.

  51. SpencerG says:

    I wouldn’t count on restaurant-going to last much longer. Labor costs, food costs, and energy costs are all rising on restauranteurs. They have held the line for as long as they can but at some point they have to charge their customers for these expenses. When that happens it is curtains for a lot of establishments… people cutting back from eating out 3 nights a week to 2 nights is a small change for them… but devastating for restaurant owners.

  52. Michael Engel says:

    1) Madam ECB isn’t in the mood to raise rates this week, but she will.
    2) Inflation caused DE10Y to rise vertically up, to close almost THREE months gap between May 5/ July21 2014, 1.460%/1.16%, – during Portugal, Italy, Ireland, Greece and Spain debt crisis – until it stopped in June 13 2022 @1.93%, when SPX hit it’s bottom.
    3) June 13, a trigger, sent DE10Y down to the gap area.
    4) June 13, US10Y trigger at 3.50% sent rates down.
    5) Both US10Y and DE10Y were rising vertically up while SPX was falling.
    6) If SPX S-wave cont to Feb 2020 top, both rates will be down.
    7) But if the global energy crisis get much worse in the mid 2020’s, both US10 & DE10 might test their 2008 level.

  53. Michael Engel says:

    1) Bethlehem steel Johnstown PA was flourishing for over a century.
    2) It employed over 150,000 workers in their history, 18,000 in the seventies, tens of thousand union retirees to support.
    3) Satellites companies produced radiators, stoves, cookware, heavy armor… business was good in downtown Johnston for decades.
    4) Then the snow melted and Johnstown was flooded in 1977. The sun and the wind harden the sewer in the mud.
    5) Innovative minis bit the giant steel industry companies like sheep dogs.
    6) Then came China and the 80’s recessions. Johnstown Bethlehem steel is a long rusty skeleton. The downtown stores are shuddered for four decades. The unemployed walk aimlessly in the streets.
    7) Can JP revive US steel industry with zero rates or rates between 5%-7%.
    Can it be done.

    • Petunia says:

      ME,

      I lived in NE PA and got to see the abandoned remnants of the Bethlehem Steel Plant in Bethlehem, PA. The town itself is a gem, I truly enjoyed going there. The old plant is now a thriving casino from what I understand. Shouldn’t surprise anyone that a once thriving American company was eventually reduced to a casino.

      • Hi Petunia,

        Yes, utter shame.

        Popular narrative reproduced by Michael above, basically asserting a natural process.

        I assert “THE STEEL”, was killed by bad economic management of the country.

        Excessive fondness of a highly valued currency disadvantaged our producers.

        Sure, THE STEEL could have been more efficient, but not sure that was a fatal condition.

        Our domestic manufacturers exist in the economic environment that comes out of DC, and they live or die based upon the intelligence of whomever is in office, at the moment.

        Utter shame about “THE STEEL”.

        Avoidable.

        • THRILLHOU says:

          @Avraam – I have seen commenters here note that, while history does not repeat, it often rhymes.

          “When Europe and Japan began rebuilding, they constructed mills using new and innovative technology. These ‘basic-oxygen’ furnaces and continuous casting methods proved far more efficient and less expensive than steel produced by the open-hearth integrated mills in America. Rather than adopt the new process, executives at firms such as U.S. Steel, Bethlehem Steel and Republic Steel stubbornly stuck with their outmoded methods. Not until the 1960s did a few basic-oxygen plants open in the United States.” [Seattle Times 03.13.2018]

          Absolutely avoidable, and a really stark warning about the reality of the crony capitalism so favored by our culture.

          As a sidebar, I grew up in a rust belt town, that was once home to a 10,000 employee US Steel plant. It was floundering when I was wee, gone by high school. 50 years later the site sits; empty, isolated, polluted. That pisses me off.

      • Keppered says:

        Same thing in Seattle went for Bethlehem Steel. The plant was removed with the west seattle bridge taking its place. This bridge has been closed for repairs 3 to 4 years now because of structural cracks.

  54. Staxie Hound Dog says:

    It’s like there is a “hidden hand” running the economy with a nationalist agenda. Who’d of thunk it?

  55. Bam_Man says:

    Why bother saving when the highest of “High-Yield” Savings accounts are paying 1.50% and inflation is practically in double-digits?

  56. NARmageddon says:

    The USSR no longer exists. It failed because it got tricked into debt by the USA. There is a lesson to learn there.

    We now have the RF (Russian Federation), which has rock solid finances and a solid currency based on commodities. Which is why Washington is pissing their pants and starting wars to try and conquer Russia again. It is all quite obscene and amoral, but this is the country we live in.

  57. NARmageddon says:

    The above comment has now been placed into the correct position further up. lease do not replay at this location. Please delete when convenient.

  58. Wayne says:

    Flocking to restaurants? Where is your data coming from. I own 32 restaurants in Florida. I have associates who own restaurants in NYC, PA, and GA and all of us…..I mean all of our restaurants..,,have seen business drop by 30-40% in the last six months while costs have increased across the board. I call BS on this Wolfe.

    • Wolf Richter says:

      Maybe your restaurants are no longer popular, or you jacked up your prices too far??? Restaurants have life cycles, as you know. Maybe time to do some navel-gazing?

      Counter-example: the popular restaurants in San Francisco, including all the ones we like to go to, are packed and are hard to get into on weekends, and sometimes even during the week. And those restaurants have many more tables than they used to have because now they have outdoor and indoor seating.

      “Where is your data coming from.”

      RTGDFA, not just the headline. I told you were the data came from, in the first paragraph. It came from the retail report by the Census Bureau, which surveys tens of thousands of retailers and restaurants by location around the country.

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