Kudlow: All spending should be paused until inflation comes down
'These emergency relief packages could have been labeled China stimulus' says the FOX Business host
Kudlow: Q4 could be combination of high growth and high inflation
‘Kudlow’ host shares his thoughts on consumers’ spending jumps despite inflation surge.
You know folks, we had a new batch of economic numbers today that show clearly, this economy does not need one more dollar of stimulus.
And in fact, one of the numbers shows we have way too many dollars floating around and causing inflation. So, hold on to your seat belts. Despite rising prices, consumers are buying, and buying, and buying.
Retail sales for October that came out today were up 1.7% for the month and 16% for the past 12 months.
16%. That is a big number. In fact, that is a number that suggests all these wonderful folks buying everything are already stimulated.
Second, on inflation, despite a steady king dollar, import prices jumped in October by 1.2%. Or 10.7% year over year. Think of it this way.
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All the emergency relief – $4 trillion last year, $2 trillion this year, maybe another $4 trillion coming – all that cash has gone into people's pockets, and they bought out our retail store shelves and have also gone shopping in China. In fact, these emergency relief packages could have been labeled "China stimulus."
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Now, we're going to talk much more later about the meeting between Biden and Xi, but import inflation is rising significantly, and let’s not forget a couple days ago, you had a CPI that was up 6.2% year over year – biggest in 31 years.
And rounding it out today, a big increase in industrial production and manufacturing. Now this is unambiguously good. This is the supply side of the economy, especially investments in new business equipment to sustain the workforce, create jobs, productivity and higher wages.
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Business equipment is up 6% for the last 12 months – total production up 5%.
So let me cut in here and suggest to you that the October-December 4th quarter could be a remarkable combination of 8% growth and 8% inflation, which could be a 16% increase in total spending in the economy. Those are remarkable numbers. It would be a complete utter inflation-prone blowout reminiscent of the 1970s. That's what we're looking at.
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So, anybody that tells you that these Biden spending bills are necessary to help the economy is out of his or her mind. And in fact, going back to yesterday's riff regarding Janet Yellen, she blamed a lot of the inflation on the pandemic-related shortage of goods. She said there's no problem with services, which, of course, is the bulk of the economy nowadays. So I went back and looked at the ISM services survey for October.
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And it turns out not only are they booming, but their prices are roaring, service inflation up 32% over the past year – nearly identical to goods inflation, up 31%.
Again, I know it may be a little boring, but numbers tell a story – and I love storytelling. As these data points come in, it is very clear that we are overspending, over money printing, overinflating, and well, we're just over. So, I’m going to come back to my point last evening.
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Janet Yellen says inflation will peter down in the second half of next year. I think she's too optimistic. But let’s leave it there.
Senator Joe Manchin, my favorite Democrat, has been saying all spending should be paused until inflation comes down.
So, when you put the two together, BBB (Build Back Better) and any other spending bill should be paused until next year's second half, which of course coincides with an election. So, I see an economic romance here.
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Ms. Yellen and Senator Manchin – a lovely couple with an important message. No new spending until at least the second half of next year. An economic romance. I like that.
That means in terms of the House vote on spending later this week, save America. Kill the bill.
And that's my riff.
This article is adapted from Larry Kudlow's opening commentary on the November 16, 2021 edition of "Kudlow."
