Note: data not adjusted for inflation; Data: fact set; Diagram: Axios Visuals
After more than two years of repeated, repeated supply chain shocks, American warehouses and store shelves are filling up with stuff — maybe too much.
big picture: New government data released on Tuesday showed wholesale and retail sales continue to rise even as fierce consumer hunger for goods – toys, clothes, furniture, packaged goods – is a feature of the pandemic economy. As it turned out, can be reduced.
Relation: A disappointing retail sales figure a few weeks ago reinforced the notion for some that rising inflation is plaguing US shoppers and could change the buying behavior that has evolved during the COVID crisis.
- Recent profit warnings from Walmart and Target, as well as disappointing results from Amazon, make a similar point.
- Retailers admitted to Wall Street they may have miscalculated what kind of goods American households want to buy because inflation has weighed on their budgets.
- For example, Target said it ordered many TVs and home appliances that it needed to put up for sale.
Our thought bubble: This is another example of one of our favorite topics… “The stock market is not the economy.” Let’s call it TSMINTE for short.
- If you’re a Target shareholder, it’s quite a shame that the company screwed up and now has a bunch of stuff for sale at low prices. This means your profit margin is likely to decrease. (So when Target mentioned the problem, the stock price fell the most in a single day since the stock market crash of 1987.)
- But if you are a buyer: result. Maybe the huge flat screen you want is on sale. (Besides, if you’re Federal Reserve Chair Jerome Powell, whose job it is to bring inflation down to earth, it’s fair to say that some discounts are being given.)
- In other words, what’s bad for the stock market is actually good for the economy. This is the essence of TSMINTE!
Yes but: Of course, there are limits to such an argument. When everyone messes up large inventories and builds up a huge stockpile of products that don’t have demand, it can certainly be a bad thing. Businesses can go broke and people can lose their jobs.
bottom line: But for now, the stock boom is just what the US economy needs while demand appears to be slowing to take a break from the inflation that’s driving everyone crazy. And, you know, look out for sales.