Thursday, 13 June 2013

Money Supply Driven U.S. Retail Sales Growth?

The U.S. Department of Commerce today released the Advance Monthly Sales for Retail and Food Services for May showing an increase of 4.9% on May last year. Apparently the increase in May was higher than forecast (e.g. see here). But wasn't the increase simply due to more money circulating in the U.S. economy? What was the expected increase in money supply? How did retail sales do when taken this into account? The charts below depict the co-movement and correlation of monthly retail sales and M1 Money Supply, both series are not seasonally adjusted.

Source: FRED, EcPoFi

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