The U.S. Census Department releases retail sales data today showing a strong contraction in consumer spending for July [MSM LINK].  The out-of-touch financial pundits were looking for a 0.3% decline; however, the drop was four times greater with a contraction of 1.1% in spending.

“The slide in retail sales comes after Friday’s preliminary consumer sentiment report from the University of Michigan showed one of the largest drops on record, leading some strategists and economists to warn of downside risk to the sales data.” (link)

This should not be unexpected for those who read here.  Massive price inflation on essential goods is eating up wages.  Food, fuel and energy price increases are changing consumer spending habits.  Non-essential purchases have stopped….. they haven’t slowed, they have stopped. ←Emphasize this because it is not showing up yet in the data lag.

The data reflects that auto sales were the primary contributor to the decline in spending (-4.3%).  This should make sense to people because auto purchases are the largest general consumer purchase outside of home purchasing.

When purchase decisions are made by families; and food and fuel prices are skyrocketing; replacing a vehicle is not essential.  Auto sales are a key indicator of consumer confidence and income.

Overall inflation is the primary driver.  Real wages are declining (wages – inflation), and disposable income is dropping quickly.  Americans need to start talking very deliberately about what is about to happen.  CTH predicted this and has been walking through the visible outcomes as each set of new data surfaces {SEARCH BOX}.  Nothing happening right now is unforeseen or not easily understandable.

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During our previous discussion on historic, predictable and purposeful food inflation, on August 13th CTH noted “BigAg has likely already made deals for increases in government welfare payments (EBT and Foodstamps, WIC etc.). BigAg lobbies congress for higher reimbursement rates so they can raise the prices of food and export domestic product to other nations. Food assistance payments increase, and BigAg benefits. In essence, BigAg takes the fed food subsidies and fattens their profit margin. Then, they payback the politicians. It’s a circle of money.“….

If you know how the game is rigged, it’s actually easy to predict the background.  Today, exactly on cue, several media outlets are now reporting that Joe Biden is going to increase the amount of food stamp assistance by 25% per recipient, and expand the program.

New York Times – WASHINGTON — The Biden administration has revised the nutrition standards of the food stamp program and prompted the largest permanent increase to benefits in the program’s history, a move that will give poor people more power to fill their grocery carts but add billions of dollars to the cost of a program that feeds one in eight Americans.

Under rules to be announced on Monday and put in place in October, average benefits will rise more than 25 percent from prepandemic levels. All 42 million people in the program will receive additional aid. The move does not require congressional approval, and unlike the large pandemic-era expansions, which are starting to expire, the changes are intended to last. (read more)

This announcement is actually revealing in more ways than just the predictability of it.

♦ First, the 25% permanent increase is an admission by the Biden administration that food price inflation is here to stay.  The massive scale of the increase also highlights the actual reality of how much food prices are rising.   This massive and permanent increase directly undercuts the previous White House and Biden claims that inflation was “temporary”, “transitional” and likely to end soon.

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There’s hypocrisy, there’s double speak, there’s stupid decisions based on politics…. and then there’s this level of Biden hypocrisy and stupidity that cannot be adequately encapsulated.   President Trump’s energy production policy made the U.S.A. energy independent.  We were actually exporting oil and gas to other nations.

However, in the previous six months Joe Biden has:  (1) Shut down oil and energy development in ANWAR {LINK} which would increase use of the Alaska pipeline. (2) Blocked the Keystone Pipeline from completion {LINK} (3) Banned energy development on federal lands {LINK}. (4) Shut down the sale of energy leases in the Gulf of Mexico {LINK}. and (5) Blocked energy development in Texas, Louisiana, New Mexico and Alabama {LINK}  … As a direct and immediate consequence, gas and fuel prices have skyrocketed.  The price of Unleaded Regular Gasoline is now up over 60% from 2020.  Now THIS:

The price of gasoline is directly attributable to Joe Biden policy in his war against oil.  However, now that Americans are being crushed with massive prices for gasoline; and Biden is getting massive heat for his ridiculous position; this insufferable administration has the absolute nerve to ask Russia and mid-east oil producers, OPEC, to increase their production. {LINK}  You cannot make this up…

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Repost from June by Request – Several people have written to CTH for an economic review of our current status. Below this post are two primary precursor articles [Primary One and Primary Two] which outline the economic dynamic in play, and how we can look forward with accuracy to what is likely to happen. Despite the deflective talking points by the professional financial pundits, this massive spike in inflation is entirely predictable due to Biden economic policy and Biden monetary policy.

Keep in mind, the FED already said in April they would “support inflation”, that’s because – while they will not say it openly, they know there’s no way to stop it. The massive inflation is a direct result of the multinational agenda of the Biden administration; it’s a feature not a flaw, and it has nothing whatsoever to do with COVID. Also keep in mind the first group to admit what is to come are banks, specifically Bank of America, because the monetary policy is the cause.

There’s no way around this. Despite the pundit and financial class selling a counter-narrative, home prices will crash and unemployment will go up. I know this is directly against the current talking points, but the statistical reality is clear. CTH was the first place that said months ago that new home sales will plummet, that is starting to happen right now. There’s no way for it not to happen, the big picture tells us why.

You might remember, when President Trump initiated tariffs against China (steel, aluminum and more), Southeast Asia (product specific), Europe (steel, aluminum and direct products), Canada (steel, aluminum, lumber and dairy specifics), the financial pundits screamed at the top of their lungs that consumer prices were going to skyrocket. They didn’t. CTH knew they wouldn’t because essentially those trading partners responded in the exact same way the U.S. did decades ago when the import/export dynamic was reversed.

Trump’s massive, and in some instances targeted, import tariffs against China, SE Asia, Canada and the EU not only did not increase prices, the prices of the goods in the U.S. actually dropped. Trump’s policies led the largest deflation in consumer prices in decades. At the same time, Trump’s domestic economic policies drove employment and wages higher than any time in the past forty years. With Trump’s policies we were in an era where job growth was strong, wages were rising and consumer prices were falling.  The net result was more disposable income for the middle class, more demand for stuff, and ultimately that’s why the U.S. economy was so strong.

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Florida Governor Ron DeSantis delivered a statement about the future of Florida today while visiting Cape Coral on the Southwest coast.  During his remarks, the governor highlighted his support for parent’s rights, taking the position that parents should be the ones making decisions for their children on masks, schools and vaccines, not government.

Governor DeSantis promised Florida residents there will be no lockdowns, no mandates, no restrictions and no school closures.  Additionally, the governor urged all local communities to follow common sense science and said he will soon issue an order allowing parents or guardians to choose whether their child wears a mask in schools.

“As of today, very few [school districts] are requiring it. Nevertheless, we have a lot of push from the CDC and others to make every single person, kids and staff have to wear masks all day,” DeSantis said during the event. “That would be a huge mistake.”  WATCH:

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The Florida Education Association (FEA), the largest teacher union in the state, said they will fight the Florida governor on all measures.  The teachers union is considering not going back to work with in-person teaching, and has vowed not to give up control of the (k-12) children to the parents. “Governor DeSantis continues to think that Tallahassee knows best what all Floridians need,” FEA President Andrew Spar said in a statement.  “We reject that kind of thinking” Spar continued.

“Instead, we ask Governor DeSantis to allow all Florida’s citizens to have a voice by empowering the elected leaders of cities, counties and school districts to make health and safety decisions locally based on their unique needs and circumstances,” Spar said.  Emphasizing how the union feels they have more power in the blue and leftist urban area, and they have vowed to fight any conservative effort in the state to undermine the teachers financial interests and control over Florida students.

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One of the most significant aspects to President Trump’s administration was the trade and economic team he assembled to drive the “America-First” Main Street resurgence we saw on display throughout the four years in office.  Readers will note, there was no turnover of personnel in the trade and economic team, because they were the priority, the fulcrum of the Trump Doctrine. One of the key people driving the America-First agenda was Commerce Secretary Wilbur Ross.

President Trump’s trade and economic team were laser focused on bringing back domestic Main Street economics as the foundation of our economy.  That approach put Wall Street multinationals at a policy disadvantage.   No-one without an interest in U.S. economic security was allowed a seat at the Trump table.

Policies and practices that supported made in the USA domestic manufacturing and industry were the prism through which all actions taken by the Trump administration were viewed.  The massive growth in U.S. jobs and wages was a result.  We also had an unprecedented period of deflationary pricing.  Things were, well, economically astoundingly good for American workers.

As a direct consequence China, Europe and ASEAN partners who had their foothold in the U.S. economy were weakened.  This made the U.S. (Wall Street) multinational corporations -who rely on outsourcing, offshoring and raw material export- very angry.  The exfiltration of American wealth was halted by Trump.  There were trillions at stake, and many enemies were made because of the America-First agenda.

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Consider this actual example of the White House fraud using the wage rate data.

On Friday the Bureau of Labor Statistics (BLS) said: “Median weekly earnings of the nation’s 113.6 million full-time wage and salary workers were $990 in the second quarter of 2021 (not seasonally adjusted), the U.S. Bureau of Labor Statistics reported today. This was 1.2 percent lower than a year earlier.” (Data)

On Monday the White House says: “Wages are up.”  WATCH:

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The reality is when you combine 1.2% decrease in earned wages with a 5.4% inflation rate, real wages are down 7.6% from last year. {Go Deep}

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Well, well, well…. though financial media will say this is remarkably unexpected, it is something CTH specifically predicted we would see – and it is happening exactly on the timeline CTH anticipated.

The Bureau of Labor Statistics releases the second quarter national wage rate data today {BLS DATA HERE}.  U.S. wages DECLINED 1.2% in the second quarter of 2021 compared to last year.  When reviewing the data [Table 2], look at the negative impact to women, specifically Black and Asian women:

TOP LINE – Combine a 1.2% decline in earned wages with a 5.4% overall inflation rate recently reported {Go Deep},  and what you get is a 6.6% drop in real income amid the working class.  That, my friends, is exactly what we said should be expected.  That is also why the JoeBama administration needs to pump more money into the system (human infrastructure spending) in order to stop people from realizing just how bad it is.

You cannot have declining wages and massive inflation and expect the middle-class to survive.  Additionally, when I said six weeks ago that we had just passed peak home value, this is another data point to bolster that prediction.  We are in a plateau period on macro-level real home values, from this point they start dropping.  You cannot have near double digit drops in real income and simultaneously expect people to afford high mortgages.  It just doesn’t happen.

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On July 4th, a little more than a week ago, the White House made the preposterous claim that holiday food was cheaper than last year. Everyone who buys groceries knew that level of propaganda was unmitigated nonsense and the consumer pricing data released today shows exactly that.

According to the BLS, June prices jumped 0.9%. Every month this year the CPI has been rising faster than the prior month, which essentially means inflation is rising at an ever-increasing rate. Annualized inflation (June 2020 -vs- June 2021) now shows an overall inflation rate of 5.4%.

However, at a 0.9% monthly rate -if the level stabilizes- that means the real inflation rate is 10.8% Yeah, that’s a serious problem.

The BLS data (see table 7) shows that gasoline has doubled in price year-over-year. Unleaded regular gasoline is now 46.4% higher than last year. That level of fuel price increase is crushing the working class and blue collar workforce.

Inflation overall is currently rising three to four times faster than wages. That means real wages are dropping as Americans are paying more for everything, including fast turn consumable products like food and fuel. Again, we repeat… durable good sales will suffer as disposable income shrinks. Additionally, rising housing prices combined with diminishing blue collar wages is an unsustainable trend.

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CTH has said repeatedly the road to serfdom is cemented with the catch-phrase “a service driven economy.”  The June jobs report from the Bureau of Labor statistics [BLS LINK]  highlights the JoeBama economic policy exactly that way.

Approximately 850,000 jobs were gained in June; however, simultaneously the number of long-term unemployed increased by 233,000 to the current state of four million.

While we should expect to see the leisure and hospitality industries as well as education rebounding from the various COVID-19 shutdowns, and indeed they did ( +343,000 and +155,000 respectively), manufacturing was flat (+11,000), and construction was down -7,000.  The details inside the data are not as great as the top-line would presume.

CTH looks at alternative data connected to the overall economy; empirical data and sector specific trends inside industry.  The biggest domestic issue is inflation, stunningly large increases in prices for fast-turn consumer goods like food and fuel.  Inflation is one of the primary reasons we have stated home values and home sales have peaked on a MACRO level despite the massive amount of real estate investment purchasing underway by financial institutions.

When we look at durable good production, we focus on the primary drivers of higher cost middle-class or working class products.  Seeing construction jobs decline by 7,000 at the same time real-estate values are increasing only points to the problem of working class not being able to afford new home purchases.  In the real estate sector this is unsustainable; it is simply a matter of math, income stability and wages.

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