Perhaps there will be an inventory build for the quarter after all because the build in wholesale inventories is not matched by reported sales.
Wholesale Inventories
The Census Bureau revised April from -0.5% to -0.4%. Thus, for the quarter so far, inventories are flat. Sales are another matter.
Sales and Inventories by Category
Petroleum is the big driver for declining nondurable goods sales.
Auto sales represent channel stuffing by manufacturers to dealers, accounting for the big boost in automotive sales in April.
Inventory to Sales Ratio
Mike “Mish” Shedlock
Ahhh, channel stuffing, smells like animal spirits
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We are online retailers and our distributors are giving stuff away right now. One distributor is offering buy a case and get one free. Another just gave us 20% off of everything they sell. It’s getting better every week we wait. The real economy…
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Sales drop. But inventories surge.
Eventually, the factories shut down.
And don’t get restarted until after the inventory is burned down or goes obsolete.
Classic inventory cycle recession.
It will turn into suvivial of the fittest.
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“Classic inventory cycle recession.”
Except that global debt to GDP is allegedly somewhere north of 300%.
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“Auto sales represent channel stuffing by manufacturers to dealers, accounting for the big boost in automotive sales in April.”
Weren’t they supposed to have learned the lesson last time around? It is way too early for them to have forgotten it.
Same thing with the fog a rear view mirror, subprime auto loans. Weren’t lenders supposed to have learned the lesson the last time around?
It isn’t a mistake that this is happening, again.
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As long as the equity bid price stays up, the CEOs keep their job.
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Financialization.
Most car loans packaged into ABS. The initial lender gets his cut upfront and then securities bought by yield starved dumb money institutional investors.
When the bottom drops out it will hasten the demise of many under funded pensions.
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Wall street is running the economy with cheap leverage. This will end well……….
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So if a supplier sends me some inventory, and its held up in shipping — officially it has left his inventory, and officially it is not yet in my inventory….
As some companies continue their shift to just-in-time inventory, and a LOT of companies use more “nearly-in-time” inventory (like when a customer orders a product from retailer, and it ships a few days later straight from factory) — these “official” inventories are becoming less and less helpful in gauging economic activity.
And then there are more products that get built only when the supplier has an order — “just-in-time production”?? Not sure it has a name, but its happening more and more.
Old school bureaucracies, like the BLS, are set up to monitor a domestic manufacturing based economy that used to exist back in the 1950s. Their process “works” for monitoring Government Motors, but not helpful for modern business practices.
I agree with Msh that the economy is barely hitting stall speed, but the Fed can’t make things better (and will probably make things worse) by micromanaging a service based economy using statistics designed for a manufacturing economy… not to mention the Fed is a bunch of academics –> fish out of water once they leave campus.
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What you’re describing have been taking place for years. There typically isn’t a big change in a single month and it’s the month to month change that’s looked at.
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None of these things are new concepts, but the degree of implementation has accelerated a LOT… business loans are much harder to get, even at “bad” interest rates, which makes balance sheet management much more important.. The two things that businesses can control are inventory levels and (to a lesser degree) accounts receivable / payable.
This goes to a discussion several commenters were having over the weekend: the difference between academic theory and practical implementation.
Just in time inventory is a decades old concept. So is the rest of the Toyota Production System. The theories are widely available in every college, and every consulting firm…. yet Detroit still struggles to actually implement it.
Every airline knows the tactics Southwest uses to (another “textbook” case). But the rest of the US airlines have been unable to implement the same culture.
Just because you read about something in a text book doesn’t mean you can implement the tactic in the real world.
Mid to small sized businesses are just now implementing just-in-time concepts on a big scale — and for the most part they are making the change “suddenly” and out of necessity (credit is no longer being handed out willy nilly).
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typo … yaho (one “o”) and yahoo (two “o”s)
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@kidhorn — the theories have been around a long time, widespread implementation is recent
None of these things are new concepts, but the degree of implementation has accelerated a LOT… business loans are much harder to get, even at “bad” interest rates, which makes balance sheet management much more important.. The two things that businesses can control are inventory levels and (to a lesser degree) accounts receivable / payable.
This goes to a discussion several commenters were having over the weekend: the difference between academic theory and practical implementation.
Just in time inventory is a decades old concept. So is the rest of the Toyota Production System. The theories are widely available in every college, and every consulting firm…. yet Detroit still struggles to actually implement it.
Every airline knows the tactics Southwest uses to (another “textbook” case). But the rest of the US airlines have been unable to implement the same culture.
Just because you read about something in a text book doesn’t mean you can implement the tactic in the real world.
Mid to small sized businesses are just now implementing just-in-time concepts on a big scale — and for the most part they are making the change “suddenly” and out of necessity (credit is no longer being handed out willy nilly).
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It’s DEFLATION caused by excess debt.
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