Wholesale trade inventories rose 0.1% for the month compared to Bloomberg Econoday expectations of a 0.2% rise.
Wholesalers held back inventory growth in May, up only 0.1 percent and well under a 0.5 percent rise in sales at the wholesale level. The stock-to-sales ratio is down one notch to 1.35 from 1.36.
Inventories of two very large components — drugs and autos — fell sharply, making for leaner inventories relative to sales for both. In contrast, wholesale inventories of farm products have been on a sharp climb at the same time that sales have been falling, an unfavorable mix that is lifting the stock-to-sales ratio sharply, to 1.56 vs 1.46 in April and 1.30 in March.
But in general, inventories have been held successfully in check in line against no more than moderate rates of sales growth. Business inventories will be released Friday and will combine this report together with factory inventories, which slipped 0.1 percent in May, and yet-to-be released data on retail inventories.
Alleged Success
Inquiring minds are no doubt interest to see the success noted by Bloomberg.
Here’s what success looks like, produced from Census Department Data.
Overall Inventory-to-Sales Ratio
Motor Vehicles Inventory-to-Sales Ratio
Durable Goods Inventory-to-Sales Ratio
Apparel Inventory-to-Sales Ratio
Mike “Mish” Shedlock
Geesh and that is with retail stores carrying less in inventory stock then in like what……70 or 75 years?
Macy’s stores in one of the most “economically booming” parts of the country must be carrying only about half the stock on the floor that they used to do. Sears and K-mart doing the same. Even Wal-Mart and Dollar Tree stores have removed whole aisles of stacks of shelving and made the aisles super wide…….
Hmmmm……..
That includes the grocery aisles too in those pertinent stores.
Retailers are having mind boggling quality control problems …
If you are the store manager, and you find out you have a “bad batch” (clothing with holes/color problems, electronics that fry after two uses, things that fall apart, etc) — it is usually too late for a refund from manufacturer. Knowing that you are going to eat the loss, why would you keep a large inventory?
Meanwhile, sales are slow because everyone already bought three of everything using cheap credit. No one needs extra junk, at best we might have to periodically replace a worn out item.
Cheap credit pulled a lot of sales from 2016 back into 2014. 2014 looked better than it should have, but the price is 2016 looks worse (all else equal).
If Bernanke and Yellen had any real world experience, they would have known this would happen before they messed up the economy. They are clueless academics blinded by 50 year old regressions filled with “simplifying assumptions” that are demonstrably false once you leave campus.
Everyone enjoy the “economic boom” that Bernanke / Yellen / Draghi bought for us with our money? GOOD! Because now we get the bill, while the central planners get a deluxe pension paid for by you. Suckers!!
Inventory builds are actually bullish as it means you have to make the sale (costs money to have an item sit on the shelf.” prices collapsed over two years ago (taper tantrum) and interest rates have done nothing but rise ever since (if you look at private borrowing costs plus dividends paid out to shareholders.) in other words what matters is the sale itself and not so much the inventory as when the number of actual “widgets” starts falling is when you have a problem … and this normally happens … actually always happens .., when actual inventories start to decline.
This has happened over the past month which I regard as bad for GDP .., as well as the truly massive trade deficit which keeps expanding.
The other problem (of late….I have not always been a beer and being long physical silver and not cash I think still makes me a bull) is the lack of distribution….meaning goods aren’t moving, good are sitting on the shelf, goods are being thrown out as worthless, you also have people getting sick at fast food restaurants because the food is going bad, etc)
these are all signs of a credit cycle that is turning…has in fact turned if you look at the plunge in long dated securities.
The oddity is that the USA is both swimming in liquidity (look at Wall Street, tax receipts, government spending, innovation, some growth, some carry on the yield curve) and is in the midst…still…of the biggest energy boom in World History as well as a truly massive housing and skyscraper boom…the latter two are easily the biggest since the 1920’s.
With the yield on cash in the Bank at zero where do I go for RISK ADJUSTED rates of return?
Sure not the stock market right now (ABX got crushed today for example….or take the airline stocks for example….totally annihilated.)
So on news of Brexit there is panic buying of US Treasuries? The Euro and Pound are getting crushed….why would I buy Treasuries? The trade deficit will a hit a trillion give or take as British oil and Western European refined product starts flooding the market. Same goes for food, lumber, autos, titanium, tanks,….you name it…prices must fall, yields must rise.
I think gold lagging because folks are terrified that the US dollar will soar if say Bank of America suddenly plunges to a dollar a share.
Needless to say oil prices look ready to retest 25 bucks a barrel no matter what happens since the Banks have already collapsed…certain in Europe.
… that “swimming in liquidity” only applies to tier one banks and Wall Street. No velocity of money effects at the consumer level, thus, non of that inflation that they keep talking about at the fed… Yellen did say that the Fed has done it’s job at the monetary level, but Congress had basically failed at the fiscal level. How much excess reserves??? Something like 2.3 billion?
PS… listen for helicopters when this stuff starts to sort out.
When you hear the sound of helicopters, it will probably Bernanke going into hiding. Not saying he doesn’t want to throw other people’s money out the window, just saying he is slowly realizing it might have consequences for him too,
Bernanke is finally reading some real world history books. He is up to France and the South Sea Company. When he gets to the chapter on how things ended for John Law… that’s when you’ll hear a man screaming and helicopters spinning up.
I’ve been seeing great bargains in bicycles and parts. Too bad I already have enough bikes and parts from the last time inventory reduction took place.