Retail Sales indicates the economy is dormant

Charles Evans of the Chicago Fed is downbeat on inflation, but upbeat on economic activity:

The real economy in the U.S. is on solid footing, and I expect this momentum to carry forward into 2018.

For some time now, activity in the U.S. has been led by solid gains in consumer spending; and more recently, growth in business capital spending has picked back up as well. With healthy labor markets and much improved household and business balance sheets, the fundamentals for continued solid growth in 2018 look pretty good.

The news on inflation, however, has not been as good.

Retail sales data came out. I wonder where the economy shows “solid gains in consumer spending”. The chart indicates that for the past five years, overall spending and retail sales growth has been quite stable, albeit at a low rate.

The range in the chart is the one obtained from growth since 1993. While during the expansion of the 1990s, 4% growth in retail sales was the minimum, now it is the maximum! And this is happening despite the fact that during 2008-09, retail sales (and nominal spending more generally took a deep dive.

 

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