Michael R. Strain, Columnist

Attention, Inflation Skeptics. Shoppers Are Talking to You.

Strong consumer spending in October betrays fears of higher prices by Christmas. That’s inflationary psychology, and it’s self-fulfilling.

November 18, 2021 at 12:00 PM UTC

By Michael R. Strain

Michael R. Strain is a Bloomberg Opinion columnist. He is director of economic policy studies and Arthur F. Burns Scholar in Political Economy at the American Enterprise Institute. He is the author of “The American Dream Is Not Dead: (But Populism Could Kill It).”

Too many shopping days until Christmas.
Photographer: Scott Heins/Getty Images

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The robust pace of U.S. consumer spending looks at first glance like evidence that inflation isn’t hurting a resilient U.S. economy. And that’s how Tuesday’s government report on strong October retail sales growth has widely been interpreted.

Look harder, though, and a more ominous omen appears: one of inflationary psychology becoming entrenched and the risk of an inflationary spiral so intense it would require a damaging recession to correct.

Data from the Commerce Department show that retail sales increased by 1.7% in October, beating forecasts. The gains topped those in September and August, even as consumer prices rose the fastest in 31 years. October’s spending gains were the largest since March.