After two great inflation numbers where the level of both consumer and producer prices actually declined in June from the prior month, reported out Tuesday and Wednesday, today we get another big number this time on retail sales — also known as consumer spending.
Core sales have risen 8 percent at an annual rate over the past three months. And the biggest category was online sales, where non-store retailers have jumped by 1.9 percent in June, 1.4 percent in May, 1.5 percent in April, and 21 percent annually for the last 3 months. Those are big numbers.
By the way, car sales are up more than 20 percent annually in the second quarter. Another big number. We will get manufacturing tomorrow, but two booming regional manufacturing reports from New York and Philadelphia have already been reported.
So allow me to modestly redefine the reemergence of a Goldilocks economy. It used to be not too hot and not too cold. Yet that was Wall Street, and I was guilty of it too, suggesting limits to growth that might cause inflation. My new Goldilocks definition is rapid economic growth combined with stable or even disinflating prices.
That is to say, the Phillips Curve is dead. There’s no trade off between growth and inflation. Or between jobs and inflation. Speaking of jobs, weekly initial unemployment claims are rock bottom. Nobody is getting fired, but plenty of folks are being hired.
This is a new Goldilocks, on the supply-side, technologically driven. We’re talking AI, quantum computing, advanced manufacturing, and space technology breakthroughs. At the bottom of all of this is surging productivity — output per person — which is holding down business costs and consumer prices. We saw some of this movie before during the 1990s. Yet we’re seeing it again right now even bigger time.
And we have pro-growth fiscal and monetary policies, including a strong dollar, and a new regime at the Fed, and lower taxes and fewer regulations from the White House. All this is nurturing the new Goldilocks. Pessimists beware, you’re about to get whacked and you won’t even see it coming.
