One of the latest viral sensations on the internet is the word game Wordle. It’s a game similar to the bonus round of Wheel of Fortune, except you’re guessing what five-letter word is on a given day, and you have six total guesses. You sit there thinking of letters and words, trying to narrow down the possibilities. But sometimes, a word can have similar letters to another word. You can have most of the letters right and still get a wrong answer.
For instance, you can guess the word PLANE, and it is wrong because the correct answer is PLATE — one letter off. Some letter variations have as many as eight or more possibilities. It’s an easy way to show how you can come to different conclusions based on similar information.
I was thinking about this during the previous week when the White House was touting the retail sales report for the month. The Wall Street Journal reported, “Retail sales, a measure of spending at stores, online and in restaurants, rose by a seasonally adjusted 3.8% in January from the prior month.”
The White House jumped on this report, praising it as a sign that President Biden’s policies improved the economy. Retail sales are, after all, a sign of increased spending by consumers, which helps businesses move services and products.
White House Press Secretary Jen Psaki praised the report. She said, “This data builds on the historic economic progress we’ve seen over the last year and an extremely strong jobs report last month despite Omicron, which was well above expectations.” She added, “This strong, inflation-adjusted increase reflects the resilience of the economy, even in the face of Omicron.”
The Wall Street Journal appeared to agree, “That marked the strongest monthly gain in retail spending since last March, when pandemic-related stimulus was being distributed to households. The jump added to signs that the U.S. economy started 2022 with plentiful jobs, sizable wage gains and consumers with cash to spend.”
But there’s more to the report than meet’s the eye.
First, let’s take Psaki’s statement that the report is “inflation-adjusted.” That is not a true statement. The same Wall Street Journal report included these lines:
Unlike other economic-data reports produced by the U.S. government, retail sales aren’t adjusted for inflation. That means higher retail-sales figures can reflect higher prices rather than more purchases.
The government doesn’t calculate the role of inflation in this advance report on retail spending, but economists estimate higher prices are a significant part of spending in recent months and that inflation is eroding consumers’ spending power.
The Wall Street Journal isn’t lying about this point. The Census Department’s report says this: “[Retail sales are] adjusted for seasonal variation and holiday and trading-day differences, but not for price changes.”
In talking to experts on the retail sales data, the WSJ found that inflation was a significant part of the increased sales numbers. One expert “estimated that in 2021 about one-third of the increase in retail sales was due to inflation. He thinks that share will rise to about 60% in 2022. Other estimates back up this view.”
Reuters talked to economists who “estimated that retail sales rose about 2.8% in January when adjusted for inflation, which put them back in line with their pre-pandemic trend.” Once you start accounting for inflation, the growth number starts shrinking.
This point should make logical sense. Retail sales estimates how much more money consumers are spending on products. When inflation isn’t an issue, a bigger sales number suggests people buy more products. But that’s not happening right now.
Americans are experiencing supply-chain shocks, shortages in grocery stores, and price increases that match or break 30 and 40-year records. If you’re an American and go to the grocery store, you experience the real impact of inflation, meaning getting less for your money.
The Biden administration is desperate to find a message that makes people forget inflation. The problem is that they’re doing nothing. It is impossible to find a message that convinces people that inflation isn’t there. If you’re in the check-out line, you can see the register totals go up every week as you purchase the same items.
If you’re watching this White House, you have to ask about their end goal for inflation. Are they making a mistake, picking the wrong letters like a Wordle game with multiple options? It’s hard to make that case when the White House can’t even talk about the government’s reports truthfully.
The White House is hammering away at the inflation issue, begging the answer to be one thing — transitory, peaking, or going away soon. However, like so many past tests the White House has encountered, they seem destined to fail by refusing to acknowledge any other ways to read the data or the moment.
An old quote comes to mind. “The definition of insanity is doing the same thing over and over again and expecting a different result.” If the White House were honest with itself, they’d try something else.