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The "Real" Consumer Remains in a Recession

The next chart gives us a perspective on the extent to which this indicator is skewed by inflation and population growth. The nominal sales number shows a cumulative growth of nearly 138% since the beginning of this series. Adjust for population growth and the growth drops to 94%. And when we adjust for both population growth and inflation, retail sales are up only 18.9% over the past two decades. Retail sales have been recovering since the trough in 2009. But the "real" consumer economy, adjusted for population growth is still in recession territory — 10.0% below its all-time high in January 2006. As I mentioned at the outset, nominal retail sales rose 0.1% in June. However, high gasoline prices essentially act as a tax on economic growth: The more we spend on gasoline, the less we have to spend on other goods. With this concept in mind, let's look at the real, population-adjusted retail sales excluding gasoline. By this analysis, adjusted retail sales ex gasoline rose 0.4% in July from the previous month and 2.5% year-over-year, but it is down 10.9% below its all-time high in January 2006. The Great Recession of the Financial Crisis is behind us, but a close analysis of retail sales suggests that the recovery has been weak. And in "real" terms — adjusted for population growth and inflation — the consumer economy clearly remains in a recession.

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