70% of GDP is consumption, with that in mind, seeing such a bad number with a downward trend is very concerning for the future of the economy, revenues, profits, EPS.
Remember that core inflation is still very high at 3.9%. At this pace, we could end up in a stagflationary environment.
While many look at Nominal GDP. They are missing the importance of REAL GDP (inflation-adjusted)
Real GDP has only risen by $1.8 trillion since 2019 while total public debt has risen by $12 trillion during the same period. A horrific ROI! That means for every $1 of borrowing by the US Gov't we only get 15 cents of real economic growth. Wait! It gets worse.
I recently posted this chart, Real GDP to Public Debt since 1971. The trend is alarming. We are adding more and more debt while getting less and less Real economic growth.
At this rate, we will end up in negative territory. Meaning, that the more we print the less and less economic growth there will be. The more we feed the beast with debt the more debt the beast wants!
Gradually then suddenly!! Works great till it doesn't!
A lot of deep macroeconomics in this post I know. For now, let's focus on the near future. Retail sales are concerning at the very least.
Fundamentally I agree with you that exponential growth based on debt is not sustainable but some of your communication here is very questionable. Data from (ECONOMICS:USRSYY) goes back to 1993. It seems to fluctuate between 0.5 and 8. It seems sensationalized to announce retail sales are collapsing when Jan24 at 0.65 is still within the normal range of fluctuations. All be it, the value is still below the average with a decreasing trend. Secondly, does (ECONOMICS:USRSYY) measure % of GDP allocated to consumerism? It seems like (ECONOMICS:USRSYY) measures the change in retail sales over the previous year's month. Finally, is "At this rate, we will end up in negative territory" an appropriate summary for GDPC1/GFDEBTN? Can you refute an alternative theory that the trend is not linear but instead some function with an asymptote that has resulted as the adjustment away from the gold standard?
RealMacro
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@alex.d.eremin, I don't care what the actual number is for retail sales. I care about the trend.
I have no idea why it matters that USRYY going back to 1993 matters. I am not analyzing 1999. Retail sales going from 5.31 to 0.65 YOY and -0.8 when expected -0.1 prior 0.4 is not a collapse in your eyes. Interesting.
How much real GDP are we getting per dollar borrowed? Can you refute that economies do get a lower and lower GDP1 while printing more and more? 158 economies to be exact since 1960 have.
In Japan, everything looked normal too for decades and decades...
@RealMacro, I guess there are two things I do not understand with your post titled "Retail Sales Collapsing". 1) How did you come to the conclusion that 70% of GDP is consumption? The graphs presented do not make it immediately obvious. 2) How do you know that GDPC1/GFDEBTN have an inverse linear relationship that "will end up in negative territory" vs an inverse exponential relationship that will approximate towards a positive asymptote? I am not looking to "refute that economies do get a lower and lower GDP1 while printing more and more". Evidence seems clear. Refer to 2). I am also not looking to equivocate observations from other currencies and apply them to USD. USD holds a special place in the world and claims about the USD using other countries deserves some extra scrutiny because the USD is currently the world currency. Finally, retail sales going from 5.31 to 0.65 YOY does not seem out of the realm of a stable global hegemony because the rate of change is within the already observed range as far back as 1993. This represents a change in the acceleration of retail spending. If this trend continues for another couple of months maybe it is actually a collapse. It seems too early to call this a "collapse".
RealMacro
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@alex.d.eremin, How about you do your research first before asking me why consumption is 70% of GDP. Simple Google search can help you.
Like I said, everyone is an economist these days. Yet when pressed. Everything has to be explained to them. SIGH! I am not going down that road unless you want to pay me.
BTW retail sales are a collapse!
alex.d.eremin
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@RealMacro, Your glib tone is not lost on me. I think the biggest tragedy of the internet has been an active hostility to questions which attempt to clarify and steelman. Insecurity has mixed with insularity to allow me to live in your head rent free for the 6 hours between your two comments. Economics is not as esoteric as you think it is.
RealMacro
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@alex.d.eremin, So you have no rebuttal, nor did you answer my. Question.
Data from (ECONOMICS:USRSYY) goes back to 1993. It seems to fluctuate between 0.5 and 8. It seems sensationalized to announce retail sales are collapsing when Jan24 at 0.65 is still within the normal range of fluctuations. All be it, the value is still below the average with a decreasing trend. Secondly, does (ECONOMICS:USRSYY) measure % of GDP allocated to consumerism? It seems like (ECONOMICS:USRSYY) measures the change in retail sales over the previous year's month.
Finally, is "At this rate, we will end up in negative territory" an appropriate summary for GDPC1/GFDEBTN? Can you refute an alternative theory that the trend is not linear but instead some function with an asymptote that has resulted as the adjustment away from the gold standard?