Expectations Blown Away, Record Consumer Debt and Chris' Soapbox

Retail sales rose far more than expected in January as consumers persevered despite rising inflation pressures. According to the report by the COmmerce Department, advance retail sales for the month increased 3%, compared with expectations for a rise of 1.9%. Excluding autos, sales rose 2.3%, which is not adjusted for inflation. The ex-autos estimate was for a gain of 0.9%.

In this episode of The Higher Standard, Chris and Saied examine this news and try to determine what effect it will have on the economy and the seemingly ever-present inflation.

They discuss comments from St. Louis Federal Reserve President James Bullard, who said that continued Federal Reserve rate increases will “lock in” slowing inflation even with continued economic growth. He also says it's likely that the economy will slow and the unemployment rate rise towards its “longer-run natural level,” something economists define as consistent with stable inflation and in the case of the United States estimated by Fed policymakers as around 4%.

Chris and Saied look at data from mortgage technology and data provider Black Knight Inc. showing that some of the most popular pandemic boomtowns such as Phoenix and Seattle, as well as popular West Coast cities like San Jose and San Francisco, posted home price declines of more than 10% from their 2022 peaks.

They also offer some thoughts on a report from the Labor Department, which indicates that inflation rebounded in January at the wholesale level, as producer prices rose more than expected to start the year.

Join Chris and Saied for this fascinating and informative conversation.

Enjoy!

What You’ll Learn in this Show:

• Why Chris believes that home values have gone down, but we're not seeing accurate reporting of that fact.
• Why the Fed's main tool for controlling monetary policy is the Fed funds rate.
• The most opportune time for people to list their homes.
• Why unemployment is often a by-product of the Fed raising interest rates.
• And so much more...

Resources:

"CPI shows US inflation still sticky and slowing grudgingly in January" (article from MarketWatch)

"Fed's Bullard: Further rate increases would "lock in" disinflation" (article from Reuters)

"Zillow says the home price correction is winding down—here’s what 28 other forecast models have to say" (article from Fortune)

"Map: Here's where home prices are dropping the most" (article from Yahoo! Finance)

"Here’s the breakdown of the inflation report for January — in one chart" (article from CNBC)

"Retail sales jump 3% in January, smashing expectations despite inflation increase" (article from CNBC)

"Consumer debt hits record $16.9 trillion as delinquencies also rise" (article from CNBC)

"Wholesale prices rose 0.7% in January, more than expected, fueling inflation increase" (article from CNBC)