In the fourth economic report on Thursday, we learned business inventories were unchanged.

Today, the Census Bureau report on Manufacturing and Trade Inventories and Sales showed sales were down down 0.2% from June and down 0.8% from July 2015.

Inventories were unchanged from June 2016, but were up 0.5% from July 2015.

OK so what does this mean?

The meaning depends on whether you are a programmed robot or a thinking human being. Let’s first take a look at what the Econoday has to say.


Inventories were unchanged in lagging data for July while sales retreated 0.2 percent. The stock-to-sales ratio was unchanged at 1.39. Retail inventories fell 0.3 percent with auto inventories down 0.2 percent. Wholesale inventories were unchanged in July while inventories at manufacturers, a sector where demand is soft, edged up 0.1 percent.

An outright drop in inventory investment subtracted almost 1.3 percentage points from second quarter GDP growth — the largest drag in more than two years. Inventories have weighed on GDP growth since the second quarter of 2015. Expectations are for inventory accumulation to rebound in the third quarter adding to GDP growth.

Recent History

Tight management has been keeping in check business inventories which are now becoming leaner as the economic pace picks up. Retail demand is the central factor for inventories and as long as retail sales remain solid, the risk of inventory overhang is limited.

Tight Management of Inventories


Chart from the Census Bureau, anecdotes courtesy of Bloomberg Econoday via Mish.

One seriously has to wonder where Bloomberg picked up this Econoday writer. He is so pathetic I frequently wonder if he is indeed a poorly programmed robot.

Piss poor analysis week after week, month after month, would be incredibly tiresome except for the fact it provides great copy for easy rebuttal.

An inventory build could of course happen. But the most likely way is via falling sales.

Thursday Economic Reports

Mike “Mish” Shedlock