Line chart showing nominal (not adjusted for inflation) retail sales and retail sales adjusted for inflation from January 2005 to November 2023. Between 2005 and 2020, due to the low-to-moderate inflation rate over that period, inflation-adjusted retail sales tracked closely to nominal retail sales. During that moderately inflationary period, inflation-adjusted retail sales fell short nominal retail sales by a relatively small amount. Since 2021, elevated inflation has led to a larger gap between inflation-adjusted retail sales and nominal retail sales. Nominal retail sales continue to move higher while inflation-adjusted retail sales have reverted to their long-term trend over the past year. During the entire time period shown, nominal retail sales grew by 112%, and inflation-adjusted retail sales grew by 79%.
Sources: Bloomberg and Wells Fargo Investment Institute. Monthly data from January 1, 2005 to November 30, 2023. Inflation-adjusted retail sales are adjusted for inflation using Consumer Price Index goods inflation excluding food and energy.
Key Takeaways
- Consumer spending has proven to be resilient in this cycle. However, a declining savings rate combined with households increasingly reliant on credit suggest to us that this critical economic support will falter in the coming months.
- Retail sales have grown at a brisk pace since the 2020 recession. However, part of that growth has been attributed to higher prices overall. When adjusted for inflation, retail sales growth has returned to the post-financial-crisis trend.