Post 252

A snapshot of what’s going on in the world’s economy.  Financial Ructions and book reviews can be a bit more technical so feel free to skip them.  See disclaimer at the end of this note.


  • Home Depot has experienced declining sales since the fall of 2022.
  • US inflation is proving stubborn and seems to be settling in the mid-3% range:
    • Car insurance and sporting event prices up sharply.
    • Smartphone and TV prices down almost 10%
  • Fast food prices in the US are up.

And customer visits are falling.

  • The retirement savings of renters has been falling while those of owners have been rising.
    • This is what happens when rents soar.
  • In Financial Ructions:
    • Real GDP per capita in Canada is falling.
      • Americans are 45% wealthier!! (on average).
      • A quick look at what’s going on.


Home Depot

1Q/2024 Results

  • Sales: -2.3%
    • Transactions: -1.0%
    • Average ticket (purchase): -1.3%
  • US comparable sales: -3.2%
  • Comparable sales have not risen since the fall of 2022.
  • Total expenses: +5.0%
  • Operating profit: -8.5%

US Inflation (BLS)

  • Jan: 3.1%
  • Feb: 3.2%
  • Mar: 3.5%
  • Apr: 3.4%
    • Food: +2.2%
      • Food away from home: +4.1%
        • Limited service (fast food): +4.8%
    • Gasoline: +1.2%
  • Goods (less food and energy): -1.3%
  • Services (less energy): +5.3%
  • Items rising:
    • Car insurance: +22.6
    • Sporting events: +15.4%
    • Car repairs: +7.6%
    • Vet services: +7.1%
    • Beef: +7.0%
    • Shelter: +5.5%
    • Baby food: +5.1%
    • Beer: +3.0%
  • Items declining:
    • Car and truck rental: -10.1%
    • Smartphones: -9.8%
    • Televisions: -8.2%
    • Toys: -7.4%
    • Used cars: -6.9%
    • Airline fares: -5.8%
    • Appliances: -5.6%
    • Furniture: -3.8%
    • Ham: -3.4%
    • Cheese: -3.3%
    • Fish and seafood: -2.7%
    • New cars: -0.4%

Core inflation excluding food and energy:

  • Jan: 3.9%
  • Feb: 3.8%
  • Mar: 3.8%
  • Apr: 3.6%

US Retail Sales:

  • Apr: +3.0% from last year.
  • Retail sales are not adjusted for inflation which was +3.4%.
    • So, sales declined slightly in real terms.
  • Rising:
    • Food and drinking places: +5.5%
    • Gas stations: +4.0%
  • Falling:
    • Furniture: -8.4%
    • Sporting goods: -4.7%
      • No money left after spending so much at sporting events.
    • Department stores: -1.2%

Not So Fast Food

Fast food restaurants in the US in the first three months of 2024 (QSR):

  • Traffic is down 3.5%
    • By meal:
      • Breakfast: -2.2%
      • Lunch: -5.3%
      • Dinner: -1.4%
    • By channel:
      • Delivery: +10%
      • Take-out: +8.5%
      • Dine-in: +6.3%
      • Drive-thru: -10.7%
  • Prices were up 4.0%

Rich Getting Richer

Median income in the US (Federal Reserve):

  • Bottom 20%: $21,600
  • Top 10%: $378,300

Change in the median income from 2019 to 2022:

  • Bottom 20%: +5%
  • Top 10%: +15%

Average retirement savings of people in the US who have a retirement account:

  • Bottom 50% of income earners:
    • 2016: $66,000
    • 2022: $54,700
      • Down: 17%
  • Top 10% of income earners:
    • 2016: $791,100
    • 2022: $913,300
      • Up 15%

The ratio of median house price to median income in the US is the highest it’s been with data going back to 1998.

  • Even surpassing the crazy housing boom of the 2000s.

US Savings in Retirement Accounts:

  • By Income:
    • Bottom 20%: $17,500
    • Top 10%: $558,600
  • By Age:
    • 35-44yrs: $45,000
    • 45-54yrs: $115,000
    • 55-64yrs: $200,000
    • 75+: $130,000
  • By Housing Status:
    • Renter: $18,190
      • Down 17% from 2019
        • Owners’ equivalent rent soaring by 23% doesn’t help (FRED).
    • Owner: $116,000
      • Up 5% from 2019

Financial Ructions

Note: ‘Financial Ructions’ is optional-to-read for those who are interested in taking a bit of a deeper dive…

Canada: Going Nowhere

According to a report by Statcan on Real GDP per Capita:

  • It has fallen five out of the last six quarters.
    • PM: This is unprecedented outside of recessions.
  • Growth in real GDP per capita from 2018 to 2023:
    • Canada: -1.0%
    • US: +8.1%
  • Real GDP per capita in US$ in 2022:
    • Canada: $45,238
    • US: $65,420
      • 45% higher!

PM: I looked at it from a 5yr CAGR perspective to smooth things out a bit and the chart is below:

They note the following:

  • By far the greatest contributor to improvements in GDP per capita is labour productivity that results from investment/capital spending.
  • Investment per worker declined rapidly starting in 2016 following the drop in commodity prices that started in 2015.
  • Investment per worker in 2021 was the lowest since at least 2006.
  • Like the report from the Bank of Canada, they highlight limited competition as one of the reasons for lower investment.
  • Investment in residential investment has been strong which has detracted from machinery and equipment investment.
    • PM: To the extent that high levels of immigration necessitate higher investment in residential real estate, we could continue to see soft or declining GDP per capita.

In a Globe and Mail opinion piece, Claude Lavoie is critical of the Statcan report and says that “…large influxes of refugees from continuing wars will temporarily dampen growth in per capita GDP.”

  • PM: This statement is extremely misleading.  As we all know, the outrageous population growth in Canada is not a result of war refugees but deliberate policy on behalf of the government.
  • PM: His omission on this is surprising given his comments on immigration that I noted in a post back in July 2023 (see below).
  • PM: He makes no mention of the rapid growth in the public sector which is unproductive and leads to lower real GDP per capita.
  • PM: He does rightly point out that the trend has been moving lower for many years.
    • The trend has also been lower in the US.
      • Growth in real GDP per capita:
      • 1947-1999: 2.3%
      • 2000-2023: 1.4%
    • PM: I believe that this is a direct result of zero interest rates and QE which both distort the price discovery mechanism leading to malinvestment and an army of zombie companies and governments sucking the lifeblood out of the economy.
  • My post from July 2023:

Article on immigration by Claude Lavoie: He spent 30 years at the Department of Finance and the Bank of Canada.

  • A case can be made for immigration on purely humanitarian reasons.
  • But from an economic perspective, it’s not enough for immigration to grow the economy, but it should increase the size of the economy per person i.e. GDP per capita.
  • There are three main types of immigrants:
    • 25% are those chosen for their human capital
      • It takes less than five years for these people to do as well or better than someone born in Canada.
      • Their impact on the economy:
        • Short-term negative
        • Long-term positive
    • 60% are family members who accompany the first group.
      • They take 10-20 years to do as well as someone born here.
    • 15% are refugees.
      • Unfortunately, most will never reach the standard of living of the average Canadian.
  • Immigrants can help with short-term labour shortages, but ultimately create more shortages through their own increased demand for education, health care and housing.
    • Immigrants age too and often bring their parents and so immigration has little impact on the age of the population.
  • On the whole, immigration seems to have a slightly negative impact on Canadians’ standard of living in the short-term and slightly positive in the long-term.
  • All evidence suggests that the greatest beneficiaries of immigration are the immigrants themselves.
    • But immigration impoverishes the countries where they come from as those leaving are often the “best and brightest.”
  • Consequently, we must stop thinking about immigration as an economic solution and instead welcome them for humanitarian reasons and for the diversity they add to our society.
  • Article here:

PM: I would add two things.

  • There is no net wealth creation for society in deliberately attempting to drive housing prices higher through zero interest rates, lax lending standards or high levels of immigration.  It is simply a transfer of wealth to homeowners, typically older people, and at the expense of the next generation and immigrants.  It results in frustration, and resentment.
  • As mentioned in a previous post, politicians over-index in terms of real estate investment and in demonstrating their humanitarianism they drive the value of their asset prices and rental income higher.

Disclaimer: Note that Paulitical Economy™ should not be considered as investment advice, and I have not verified all of the sources of information.  It is meant for general interest purposes only.  Please consult an advisor if you plan on putting any of your hard-earned capital to work during these turbulent times.

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