“Shoppers Increase Spending, Despite Inflation”. Huh?

“Shoppers Increase Spending, Despite Inflation” was the headline of a lead article in Wednesday’s print edition of The Wall Street Journal.¹  Except, shoppers aren’t “increasing spending despite inflation”; they are increasing spending because of inflation.  Things cost more, so people have to spend more to get them.  They may be buying the same amount of stuff, but, because of inflation, they have to pay more, i.e., they have to increase their spending, to get them.

The article also said: “J.P. Morgan said it was upgrading its growth expectations, raising its forecast for fourth-quarter U.S. gross domestic product to 5% from 4%.”  That makes sense, too; it just doesn’t necessarily mean what it seems to imply.  If the prices for goods and services are higher, i.e., if we have inflation, and the amount of goods and services is the same, then the total amount paid for those goods and services will be more, because their prices are higher.  That may make it look like the economy is growing, when really we are just paying more for the same amount of stuff.

Also, there have been warnings of supply shortages this Christmas: if you want things, you need to buy them early.  Don’t wait; they might be gone.  So maybe what we are seeing is people buying things now because they are worried they won’t be able to buy them later.  Which may mean what we are seeing is merely a change in the timing of spending, as opposed to an increase in the overall amount of it.

Probably the only thing we know for sure is that we don’t know.  Economists have enough trouble agreeing on why things happened in the past to put much stock in their theories of why things are happening now.  Let alone their predictions as to what may happen in the future.
---------
¹ Gabriel T. Rubin, ““Shoppers Increase Spending, Despite Inflation,” The Wall Street Journal, November 17, 2021