If you go to social media like Twitter or Reddit, you will find many people posting about high inflation and how we are being lied to by the government. The narrative is that inflation is a lot higher than we are being told. Not 2%, 3% or 4% but 75% (let’s ignore for now that these people are comparing two different items. What is however interesting, is that the same people who are complaining about inflation are buying stuff like crazy.

Today, we received a report about retail sales growth. It was stronger than expected. The Atlanta Fed’s GDPNow tracking model shows real GDP grew 5.4% (saar) during Q3, up from 5.1% on October 10. Leading the estimate higher is real consumer spending with a 4.1% increase. I have seen people on Investing.com saying that the earnings from companies are fake because the reported EPS comes from increased prices of goods and not from increased sales. Today’s report proves this view wrong as well.

 

 

The chart clearly illustrates that sales are there supporting good EPS reports. These are coming from sales and not necessarily high prices (though they contribute to it too, but are offset by higher input prices).

But what is more striking is that people are complaining about inflation but spend like crazy. They buy everything no matter how expensive it is. Why are they buying stuff and then complain how expensive it is? And do not tell me that they are buying only essential things. They are not. The best way to measure this is to look at Amazon sales. During this fall Prime sales event, people ordered 150 million items (50 million more than prior Prime Day), and the holiday spending growth is expected to be 4.4% higher. And in July’s Prime Day, people spent 12.7 billion on stuff.

According to Amazon: “Shoppers snapped up Apple AirPods Pro, Bissell carpet cleaners and Crest 3D Whitestrips, as well as Amazon-branded devices such as Fire TVs and Echo smart speakers, the company said.” How essential is the “snapped stuff?”

So, if you want inflation down, stop buying crap.