Line chart showing nominal (not adjusted for inflation) retail sales and retail sales adjusted for inflation from January 2005 to February 2024. 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 110%, and inflation-adjusted retail sales grew by 78%.
Sources: Bloomberg and Wells Fargo Investment Institute. Monthly data from January 1, 2005, to February 29, 2024. 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’ increased reliance 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, on average. However, part of that growth has been attributed to higher prices overall. When adjusted for inflation, retail sales growth has returned to its post-financial-crisis trend.