Holiday Spending Increased, Defying Fears of a Decline
nytimes.com
nytimes.com
> numbers are not adjusted for inflation
“Retail sales increased 3.1 percent from Nov. 1 to Dec. 24 compared with the same period a year earlier”
What that means, if anything on its own, is up for debate.
"And even though consumer prices have risen a lot in the last two years, wages have grown faster on the whole"
"The holiday sales figures, driven by a healthy labor market and wage gains, suggests that the economy remains strong."
They're direct quotes from the article. The article states that wages are increasing faster than prices. If wages are increasing faster than the prices then it is not inflation.
Do you have alternative evidence that leads you to believe the article is inaccurate about this? Or is your disagreement based more on your own subjective feelings and experiences?
I see how those two numbers both being equal to 3.1% could be confusing at first, but they're not measuring the same thing at all.
I wonder why?
The rate of inflation growth has gone down.
Inflation has gone down in the US. The last few months, if you extrapolate them to an annual rate, would (I think) be between 2 and 3%, which is the Fed's normal target.
Unfortunately, some of the recent price increases may stick. However, the US has seen strong wage growth, and many areas have high demand for labor. I've seen a surprising number of businesses with 1/4th of their usual positions open.
It's a good time to apply to better-paying jobs. Not so much in the tech industry, but in other industries.
On the other hand, with rates as high as they are, it's an awful time to buy a house or a car using a loan.
It has. Inflation is the derivative of prices. Prices are increasing but less rapidly than before, which means that inflation has decreased.
Usually just the fact that something never works like the common sense implies is enough to remove a fact from the popular culture.
That's a widely popular fact. And yet there doesn't seem to be any correlation between growth and any positive amount of inflation. (There is a lot of correlation for negative inflation.)
Even the idea that "inflation" is something simple to define and measure is wrong.
That said, it seems intuitive that inflation and growth would be linked. Inflation means that there is more demand than supply, right? In response to that increased demand supply (and the number of jobs) are increased by profit seekers, which creates growth.
What am I missing?
So it’s not only ask and demand but many other factors like energy price rising and all the things that get into the cost of a product or service.
Inflation in the sense of growth is the more money it needs to have a transit of the value of goods the more goods are produced of value and sold so the net revenue for credits should be positiv and that over time is growth. Or otherwise said we have more stuff at the end of the day … jehaa
Edit:// the credit by the bank is the money supply in that case.
In my opinion that model sucks
But please don’t believe me I am no expert
But then, AFAIK nobody has a good model that actually explains what we see.
Anyway:
> Inflation means that there is more demand than supply, right?
Even in principle, balancing supply and demand is a task of price ratios. And most definitions of inflation make it something that doesn't reflect price ratios at all. Instead, it's usually about absolute prices.
„Everything gets cheaper“ is another one.
Inflation has gone down, but has not become negative (has not turned into "deflation").
But the undercurrent of, "I hope we fail" (but never me) is certainly present in a lot of discourse.
To the extent there is a media response to popular perception involved, its very sifferent than that, nearly the opposite (the journalistic class frustrated at the lack of anxiety in the public), which is why it has increased in shrillness with the positive turn in the future expectations component of sentiment (and why you had to dig into the numbers to find that the “low sentiment” on the economy being flogged before that by journalists as an indicator of negative perception of current conditions was actually all in the future expectations component, with the current situation component being quite positive even when the overall measure was down.)
“Holiday Sales Figures Mostly Unchanged” is not a clickable headline. The paper boys would fall asleep before they shout “read all about it.”
If the economy doesn't slow, we'll see more rate hikes.
It's probably a very small portion of this spending increases overall, but interesting to see.
Rates here seem to have stabilized for the time being, and house sales are way down, so I think now we're going to finally see housing price declines this spring season.
The next 2-3 years will get rough as fixed mortgages renew, with my own mortgage payment expected to increase by nearly 50% at renewal, and 70% of the total payment will go to the increased interest payments alone. The total cost of my mortgage at today's rates would be triple what I signed on for!
I don't see how this won't wreak havoc on the average families finances.
The Right understands that positive perception of the economy rebounds to the benefit of the incumbent President and they want Biden to lose to the Republican nominee for partisan reasons.
The far Left understands that positive perception of the economy rebounds to the benefit of the incumbent President and they want Biden to lose to Trump, who they expect to be the Republican nominee, for accelerationist reasons.
The news media likes negative spins because public insecurity drives news media consumption.
You could say I'm one of those people. I want home prices to come down.
If the property-owning Boomers were to respond, in that housing-crash scenario, by voting for Trump, that'd be on them. I'm sick of being held hostage though.
You want me to choose a political leader? How about Mao, to shoot the landlords, or Khrushchev, to build some apartments?
It just sounds like it might be simpler.
I tried starting a lemonade stand and cutting back on Starbucks, but found, if I really wanted a roof over my head, that the thing to do was to SPAC a plausible-sounding company into the indexes.
> moving to a more prosperous area of the world
Those are precisely the ones with the inflated home prices.
> as an alternative to razing the entire social order to the ground and installing genocidal despots in place of our leaders? ... It just sounds like it might be simpler.
I dunno. It'll take 30 years to pay off a mortgage, but the Cultural Revolution was over in about a decade. I might still have some good years left after it ends.
[1].https://www.npr.org/sections/thetwo-way/2012/11/21/165655925...
For some people who have financial stress their basket of goods is quite different than the CPI though. Eg if you're struggling to buy groceries, housing, etc they've gone up closer to 80% in the time span, that's going to feel pretty close to 100% in a fuzzy system like our minds (as opposed to statistics).
When someone used to get a burrito for $5 and it's now $9 that rounds to "double" in casual, non-pedantic, conversation.
I think I basically disagree with the notion that the sum of 20 years of inflation is driving current "bad vibes." I think it's mostly just that people experienced 10-15 years of near-zero inflation (for a significant fraction of people, this was their entire adult life) and then suddenly experienced 5-10% inflation for a year or two. It's the sudden shift from mostly stable prices that is bad for vibes (IMO). The past 20 years as a sliding window is actually a lower inflation period than most historical 20-year periods.
Take beef. Its a 5x over last 20 years [1], while corn and chicken are about 2x, yet the price of a typical computer has fallen year over year, which doesn't even take into account that the phone in my pocket probably out computes supercomputers two decades ago.
This one is not very relevant because so few people hold these instruments (both in the sense of absolutely owning any, and in a weighted sense of what % of the total rise do they get to share in)
Going back three years, we start seeing some doubled expenses. Rent and insurance are two. Household survival went from needing 2 typical incomes to 4.
(translation: buying something and paying for it are two different things)
also, the entire economy is now getting revved up for big rate cuts, which should allow consumers to further engage with traditional credit instruments, as well as opportunities for asset owners to unlock more value from rent/lease relationships
(translation: lower rates = your rent goes up...if you don't like it, sleep in your car)
strong asset prices and renewed valuations in real estate will quiet down inconvenient political rancor and assure Biden re-election
(translation: people will tune out tragedy if stocks go high enough)
For instance:
- The Economist, which has had a number of articles over the last few months about how the American economy is doing, e.g. https://www.economist.com/business/2023/10/29/americas-econo...
- Vanguard's outlook for the next 10 years, in which they talk about how well the US economy is faring - https://corporate.vanguard.com/content/dam/corp/research/pdf...
The most common equity holdings like single family homes are being bought out at blisteringly fast rates
We’re eating our seed corn
Inflation was caused by the massive increase in money supply due to the fed buying up assets and to a lesser extent the covid stimmys. Inflation followed the curve of the money supply pretty closely. The interest rates just hurt everyone, we need some brighter minds with more open thought handling the central bank fiscal policy in my humble opinion
Necessary goal, or necessary evil? I'd really like to see a citation for the Fed explicitly targeting a recession. I used to work with a former senior Fed economist (though, in the capacity I worked with him, he was researching market microstructure, not macroeconomics), and I have another friend who currently works at the Fed. In thhe past 3 rate hike cycles, I've heard lots of talk about the difficulty of a "soft landing" in taming inflation without tanking the economy.
Everything I've heard this tightening cycle has praised the near-miracle soft landing they seem to have achieved.
Taken as a control theory problem, the economy has very noisy measurements, heavy hysteresis, and a relatively long lag for all of the effects of rate changes to ripple through the economy. My understanding is that under-shooting the landing can result in long-term inflation psychologically taking root, creating more problems in the future, so the Fed tends to err on the side of triggering a recession.
I've only read the full minutes of a handful of Fed meetings, so maybe I've missed something. I'm prepared to have my mind changed, but I'm highly skeptical a recession has ever been a goal rather than a regrettable side-effect.
In response to your direct request, here's Powell talking about a "soft or softish" landing specifically calling it a recession that is not severe. https://youtu.be/Ue1aDKboQcQ?si=HRcPcJFT22kYxYQT
I find the whole back patting themselves on a "soft landing" a total joke and offensive to the American tax payers. They create so much pain, especially to those without net worth, in the name of stalling inflation when inflation is directly caused by money supply. They created the problem not with 0 interest rates but by literally injecting cash into the economy, they lied about it's effect on inflation and then they could have sat on their hands and inflation would have evened out without destroying everyone's bank accounts. They really don't need play God on the economy, it creates more problems than it solves
It seems he's pretty clearly describing what he believes is possible, not describing what he wants absent constraints imposed by reality.
It's pretty easy to play armchair economist, as the first-order effects of Fed intervention during COVID were pretty painful for a lot of middle- and lower-class Americans, at least those who would have kept their jobs even without intervention. Which models are you using and what do your models show the unemployment rate would have hit without any Fed intervention? How long would the COVID recession lasted without intervention? The question isn't "Were the Fed's actions harmful?" the question is "Were the Fed's actions less harmful than available alternatives?"
Given a potentially catastrophic situation, we're incredibly lucky to have gotten off this easy.
The best way to get a good answer on the internet is to make a false claim. The second best is to ennervate debate with something.
The point I’m making is that these kinds of macro economics statistics almost never actually reflect on the ground understanding of day to day life and even rarer give any meaningful insight.
Usually, however, they give a false sense of hope about the actual state of things if you go out into the market, and you look at savings rate that the Fed publishes, if you look at decreasing equity, because people are cashing out with no ability to put back into equity then a clearer picture forms.
As I said elsewhere, all the long-term data shows that we are eating our seed corn
Whatever the current condition is, its not a dead cat bounce. (The recent change isn't fron decline to growth, its fron a broad public expectation of future decline to more positive forward expectations.)
I suppose you could try to argue its a dead cat bounce in the future expectations component of sentiment rather than in the econony itself.