September retail sales and food services presage a holiday season worth celebrating, despite supply shortages, worker shortages, and the pandemic. Seasonally adjusted retail sales are up 12 percent over last September, which means that the demand for goods and some services is at a historic high.
So the shortages are due to consumers and businesses buying more than ever, more than last year and all the years before, in spite of the supply shortages.
There’s little evidence of production shortages, per se, as much as a slowdown in getting to their destinations in ports such as Los Angeles and Long Beach, where more than half of all imports to the U.S. arrive.
NY Times Paul Krugman put up a FRED graph that illustrates the huge surge in the demand for durable goods—goods like appliances and vehicles that last more than three years. It tells us that said demand can continue above the average dotted trend line into the year end holidays.
The demand for services such as leisure activities and travel is lagging because the pandemic has kept many consumers at home. But that will pick up as well once the Pandemic is subdued.
And what if the Infrastructure and Build Back Better bills pass would add additional $ trillions to programs that boost businesses and improve consumers’ lives? Then the boost in demand for goods and services could be prolonged for…years.
Should we worry about inflation because too much money is in circulation, driving up prices? Not if it’s put to productive uses, as I’ve been saying. Both physical and so-called social infrastructure spending go into increasing productivity, hence a greater supply of goods and services, not excessive speculation in the financial markets as have past tax cuts from which the wealthiest most benefited.
Studies have shown that parents in such states as California that have some of the social infrastructure proposals in President Biden’s Build Back Better Act, such as paid family leave and child care, allow them more family time and resources to raise their children, thus reducing the number of children trapped in a cycle of poverty.
And better physical infrastructure will help to cure the supply bottlenecks. “In the longer run, investments in infrastructure could help much more: U.S. ports, rail lines and so on are shabby compared with their counterparts in other countries and could be much improved.” says Krugman.
So we really need to grow what one political scientist has termed our social capital as much as physical infrastructure, if we want a sustainable recovery. It can be done by improving people’s lives.
Harlan Green © 2021
Follow Harlan Green on Twitter: https://twitter.com/HarlanGreen
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