Inventories for February declined 0.1% but sales fell 0.4%.

The only reason the inventory-to-sales number did not rise further is January inventories were revised from +0.1% to -0.1%.

On the surface, the Bloomberg Econoday economists’ consensus estimate for inventories was right on the mark at -0.1% in a range of -0.2% to +0.2%.

However, revisions took January’s reading from +0.1% down to -0.1% so compared to the initial January reading, inventories are down -0.3% outside the range of estimates.

Highlights

Sales are falling but fortunately so are inventories which fell 0.1 percent in February vs a 0.4 percent decline for sales. The combination keeps the inventory-to-sales ratio, which has been trending higher, at 1.41.

Retail inventories rose a very steep 0.6 percent in February especially against a 0.2 percent decline for sales. Retail inventories of autos, where sales have been weak, rose 1.3 percent in the month to swell the inventory-to-sales ratio to 2.14 from 2.12. Inventories at both manufacturers and wholesalers fell in the month to keep ratios for these readings stable.

Retail inventories, given this morning’s weak retail sales report for March, may be a risk to the nation’s inventory outlook, especially for autos where inventory backup also points to trouble for factory production. Lower down the supply chain, however, sales and inventories are balanced, at least for now.

Recent History

Business inventories have been flat but not flat enough relative to sales which have been on the decline. The stock-to-sales ratio, at 1.40 in January, was the heaviest since 2009. Unwanted inventories are negatives for the production and employment outlooks. The consensus forecast is calling for a 0.1 percent dip for business inventories in February.

Inventories-to-Sales

Inventories to Sales 2016-04-13

GDPNow Forecast

As with today’s dismal retail sales report (see Retail Sales -0.3%; Autos Down 4th Month, Plunge -2.1%; Hooray Gasoline Up 0.9%) these numbers should subtract from first quarter GDP estimates.

These things are a tough read actually but I suspect today’s GDPNow forecast from the Atlanta Fed will dip to -0.3%.

We will find out shortly.

Mike “Mish” Shedlock