Thursday, June 12, 2008

Stimulus Checks for Oil or that New Plasma? Depends...

There were a lot of posts regarding the latest retail sales figures and how well the stimulus plan is / isn't working, so I thought I'd take a stab at it. There was applause, doubt, and Calculated Risk showed that even though things seemed rosy month to month in nominal terms, sales remained negative in real terms. This got me wondering how well "real" sales really were broken up by category.

To do this I simply took year over year sales growth and subtracted out year over year CPI, again by category (basic, but I am a basic man). I was going to wait for new CPI data tomorrow, but was flat out too excited to see the results...

For a little background; inflation has been shown (previously here at EconomPic Data) to be especially high in:

  • Fuels / Transportation
  • Medical Care
  • Food
While inflation has been less existent (or even negative) in:
  • Electronics
  • Apparel
  • Home Furnishings

So where are the stimulus checks going? I would argue that the stimulus checks are going straight to the tank in nominal terms (i.e. important terms) and that new shiny Plasma in "real" terms (i.e. unimportant terms). While "real" sales at gas stations are down a massive 30%+ year over year, nominal sales are up 13.8% year to year after the unbelievable run up in prices. The only area in which we see an actual "real" increase is within Electronics. This is an area in which prices are being squeezed, so using a conservative CPI inflator (yes inflator) of -6.4% deflation, we get a 10.1% year to year increase by volume vs. 3.7% increase in nominal terms.




Conclusion:

Are people using their stimulus checks for more Plasma TV's rather than more gallons of oil? YES!

Are people spending more money year over year on gas than electronics or anything else for that matter? YES!