Rising prices as consumer spending falls are a bad omen for the economy heading into Christmas holiday season
Normally a decrease in consumer spending should coincide with retailers and producers lowering prices to entice buyers into the markets, however this has not been the case here in the middle of November and just before Black Friday and the Christmas holiday shopping season is about to get under way.
On Nov. 15 two economic reports came out which show that core price inflation is rising at the same time retail sales growth is declining.¬† And while the latter can always mean that stores have had to lower prices in order to sell more quantity, the reality is that too many other factors such as rising energy costs as well as rents place these retailers in a bind to not be able to lower costs in order just to survive.
Following September’s unprecedented storm-related surge in retail sales (which was revised even higher),¬†October was a fall back to reality¬†with a 0.2% MoM rise (better than expected 0.0% though),¬†pushing the YoY growth back down to 4.6%.
Retail sales were up a modest 0.2% in October, following¬†September’s 1.9% revised (from 1.6%) gain.
Compared to October 2016, retail sales in October were up a solid 4.6% % year-on-year (y/y). –¬†Zerohedge
Core Consumer Prices:
Following yesterday’s¬†hotter than expected PPI,¬†Core Consumer Prices printed above expectations (+1.8% YoY vs +1.7% YoY exp) –¬†the fastest rise since April 2017.
When you add in the fact that Americans have achieved the highest level of household debt in history, even surpassing the period nine years ago that led to millions of foreclosures and the introduction of the Great Recession, an economy that was already teetering on the edge of a knife due from thousands of stores closing in 2017 will see even more retail destruction if this month’s trends are an omen entering into the most important time of the year for businesses.
Kenneth Schortgen Jr¬†is¬†a writer for¬†The Daily Economist,¬†Secretsofthefed.com,¬†Roguemoney.net, and¬†Viral Liberty, and hosts¬†the popular¬†youtube podcast¬†on Mondays, Wednesdays and Fridays.¬†Ken can also¬†be heard Wednesday afternoons giving an weekly economic report on the¬†Angel Clark radio show.