It’s only phenomenal when it’s nominal, a look at real retail sales

Summary

• Is this the real life? Is this just fantasy? Retail sales shot up 4.9% in January, the largest monthly gain in any pre-pandemic month in 20 years before posting another gain in February. Unfortunately, there is no escape from the reality that inflation is higher now as it was when Queen's “A Night at the Opera” album was released in November 1975.
• The retail sales figures are reported nominally, which is to say: not adjusted for inflation, and thus must be taken with a grain of salt today when considering how the highest inflation in 40-years is eating into consumers purchasing power.
• We've constructed retail sales deflators based on the Consumer Price Index for total retail sales and per retail category to get a cleaner read on the degree to which prices are driving recent sales gains.
• The real estimates demonstrate more muted sales gains. The reported figures from the BEA suggest total retail sales are a whopping 25% ahead of their pre-pandemic February 2020 level. But when adjusting for the run up in consumer prices, we estimate real retail sales "just" 8% higher than prior to the pandemic.
• Sales at auto retailers and gasoline stations are where the real versus nominal divide is the most striking. While nominal auto sales are 28% ahead of pre-pandemic levels, dealers aren't moving more cars, but rather cutting dealer incentives and price concessions with real sales down about 1%. Similarly, consumers are actually purchasing a comparable amount of gasoline today as they were two years ago, they're just paying more to fill up their tanks.

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