America’s Stagflationary Mess—The Bastard Son of MAGA, Part 2

The evidence is plain as day. The US economy has been twisted, tortured, unbalanced and booby-trapped by the policy chaos Donald Trump unleashed during his 48 months in office.

As one example of this economic torture, consider the combined effects of the massive stimmy checks plus the lockdowns on service sector venues like restaurants, bars, gyms, movies, hotels, resorts and sports arenas. The effect was to hit the brakes on ordinary spending for services, while causing a doubled-barreled explosion of spending for merchandise goods.

That is, when households couldn’t spend their normal allotments at locked-down social congregation venues they cranked up their Amazon orders for what was believed to be safer front-doorstep delivery of merchandise goods.

And not by just a lot. The surge in durable goods consumption spending, in fact, was just plain insane. The chart below tracks the Y/Y change in household spending for durable goods, which fluctuated between +$50 billion and +$100 billion before the pandemic.

And then, bang! By April 2021 household spending for durables was up by +$950 billion versus prior year or by more than ten times the normal gain. That wasn’t merely a so-called bull-whip effect; it was an economic cyclone that ripped through the entire economic infrastructure, depleting inventories at all levels and straining a fragile global supply chain to the breaking point.

Y/Y Change In PCE For Durable Goods, 1993-2021

Indeed, the retailers’ inventory depletion was swift and dramatic. Between October 2019 and June 2020, retailer inventories crashed by $84 billion, which was an even larger drop than had occurred during the bottom months of the Great Recession. Then, after a modest rebound, retailer inventories were hit with the second and third stimmy rounds in January and March 2021, causing another wave of spending on durable goods and related supply depletion.