Before Thanksgiving, growth deniers told us that consumers were not shopping this year, then when consumers packed the malls, we were told that they weren't actually buying anything but where bargain hunting as a "sport." If they did buy anything, we were told, it would only be items on sale at a deep discount. When the sales reports came in well above 2006, the growth deniers explained that this was because of a quirk in the calendar that created an extra week in November. Yesterday, the U.S. Census Bureau released their calendar adjusted figures for November retail showing that sales were up 6.3% over November 2006. The growth deniers can explain this as well. It is inflation they say, without inflation and the different reporting calendars there would be no growth. Is this true? Of course not.
To begin with, the U.S. Census figures were already adjusted for the differences in reporting calendars between '06 and '07, so we don't need to bother with that claim. The inflation claim is more interesting. What is the inflation rate right now? Including energy and food, the twelve month CPI was at 4.3% in November. This is the second or third highest in the last ten years and cause for concern. It is not so high that it waives away 6.3% in sales growth. The chart below of the 12 month CPI for the last decade gives some historical perspective.Of course, this chart is slightly skewed because it reflects a rise in commodity prices, which are partly inflationary and partly do to increasing global demand. Also, if we are talking about Holiday shopping, it is not quite relevant, people do not buy kilowatts and bushels of grain for Christmas presents. The twelve month CPI, excluding energy and food, was 2.3% in November, which is only slightly above the 10 year average and lower than it was for most of last year. See the graph below.As you can see, this year is not extraordinary compared to the last 10 years in regards to inflation. While some of the increase is do to inflation (this would be true in any year) it does not justify the position that sales this November are either flat or down from last year. Nor does it justify the position that reports of November sales are significantly less meaningful this year than in years past.