Retail Sales Up, Even with Inflation Running Hot

By at 17 May, 2022, 7:01 pm

by Raymond J. Keating –

The U.S. Census Bureau reported that retail and food services sales were up by 0.9 percent in April. For good measure, March sales growth was revised up from 0.7 percent to 1.4 percent.

Of course, these nominal gains need to be put in perspective when inflation is running hot, as has been the case for over a year now.

Retail and Food Services Sales Growth and CPI Inflation, April 2021 to April 2022

Source: Federal Reserve Bank of St. Louis, FRED

The above chart shows percent changes in retail and food services sales versus inflation as measured by changes in the Consumer Price Index.

It turns out that the April gain in retail sales ran well ahead of inflation for a solid real gain. Also, with the March sales revision doubling the nominal gain, a real loss for the month of March was moved up to a slight real gain in sales.

Retail sales have experienced four straight months of real gains, which is noteworthy given how hot inflation has been running. It also marked a nice recovery from real declines suffered in November and December of last year.

For now, even in the face of inflation, the consumer is holding up relatively well. That aligns with what we saw in the first quarter GDP data whereby overall real GDP shrank, but personal consumption expenditures experienced real growth. (See SBE Council’s analysis.)

However, in the end, consumer are followers. If inflation and federal policymaking undermine business investment and hiring, then we’ll see a clear negative effect on consumers.

Raymond J. Keating is chief economist for the Small Business & Entrepreneurship Council. His latest nonfiction book is The Weekly Economist: 52 Quick Reads to Help You Think Like an Economist.



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