Best of the Week
Most Popular
1. US Housing Market Real Estate Crash The Next Shoe To Drop – Part II - Chris_Vermeulen
2.The Coronavirus Greatest Economic Depression in History? - Nadeem_Walayat
3.US Real Estate Housing Market Crash Is The Next Shoe To Drop - Chris_Vermeulen
4.Coronavirus Stock Market Trend Implications and AI Mega-trend Stocks Buying Levels - Nadeem_Walayat
5. Are Coronavirus Death Statistics Exaggerated? Worse than Seasonal Flu or Not?- Nadeem_Walayat
6.Coronavirus Stock Market Trend Implications, Global Recession and AI Stocks Buying Levels - Nadeem_Walayat
7.US Fourth Turning Accelerating Towards Debt Climax - James_Quinn
8.Dow Stock Market Trend Analysis and Forecast - Nadeem_Walayat
9.Britain's FAKE Coronavirus Death Statistics Exposed - Nadeem_Walayat
10.Commodity Markets Crash Catastrophe Charts - Rambus_Chartology
Last 7 days
Silver Market Is at a Critical Juncture - 3rd Jul 20
Gold Stocks Breakout Not Confirmed Yet - 3rd Jul 20
Coronavirus Strikes Back. But Force Is Strong With Gold - 3rd Jul 20
Stock Market Russell 2000 Gaps Present Real Targets - 3rd Jul 20
Johnson & Johnson (JNJ) Big Pharma Stock for Machine Learning Life Extension Investing - 2nd Jul 20
All Eyes on Markets to Get a Refreshed Outlook - 2nd Jul 20
The Darkening Clouds on the Stock Market S&P 500 Horizon - 2nd Jul 20
US Fourth Turning Reaches Boiling Point as America Bends its Knee - 2nd Jul 20
After 2nd Quarter Economic Carnage, the Quest for Philippine Recovery - 2nd Jul 20
Gold Completes Another Washout Rotation – Here We Go - 2nd Jul 20
Roosevelt 2.0 and ‘here, hold my beer' - 2nd Jul 20
U.S. Dollar: When Almost Everyone Is Bearish... - 1st Jul 20
Politicians Prepare New Money Drops as US Dollar Weakens - 1st Jul 20
Gold Stocks Still Undervalued - 1st Jul 20
High Premiums in Physical Gold Market: Scam or Supply Crisis? - 1st Jul 20
US Stock Markets Enter Parabolic Price Move - 1st Jul 20
In The Year 2025 If Fiat Currency Can Survive - 30th Jun 20
Gold Likes the IMF Predicting a Deeper Recession - 30th Jun 20
Silver Is Still Cheap For Now - 30th Jun 20
More Stock Market Selling Ahead - 30th Jun 20
Trending Ecommerce Sites in 2020 - 30th Jun 20
Stock Market S&P 500 Approaching the Precipice - 29th Jun 20
APPLE Tech Stock for Investing to Profit from the Machine Learning Mega trend - 29th Jun 20
Student / Gamer Custom System Build June 2020 Proving Impossible - Overclockers UK - 29th Jun 20
US Dollar with Ney and Gann Angles - 29th Jun 20
Europe's Banking Sector: When (and Why) the Rout Really Began - 29th Jun 20
Will People Accept Rampant Inflation? Hell, No! - 29th Jun 20
Gold & Silver Begin The Move To New All-Time Highs - 29th Jun 20
US Stock Market Enters Parabolic Price Move – Be Prepared - 29th Jun 20
Meet BlackRock, the New Great Vampire Squid - 28th Jun 20
Stock Market S&P 500 Approaching a Defining Moment - 28th Jun 20
U.S. Long Bond: Let's Review the "Upward Point of Exhaustion" - 27th Jun 20
Gold, Copper and Silver are Must-own Metals - 27th Jun 20
Why People Have Always Held Gold - 27th Jun 20
Crude Oil Price Meets Key Resistance - 27th Jun 20
INTEL x86 Chip Giant Stock Targets Artificial Intelligence and Quantum Computing for 2020's Growth - 25th Jun 20
Gold’s Long-term Turning Point is Here - 25th Jun 20
Hainan’s ASEAN Future and Dark Clouds Over Hong Kong - 25th Jun 20
Silver Price Trend Analysis - 24th Jun 20
A Stealth Stocks Double Dip or Bear Market Has Started - 24th Jun 20
Trillion-dollar US infrastructure plan will draw in plenty of metal - 24th Jun 20
WARNING: The U.S. Banking System ISN’T as Strong as Advertised - 24th Jun 20
All That Glitters When the World Jitters is Probably Gold - 24th Jun 20
Making Sense of Crude Oil Price Narrow Trading Range - 23rd Jun 20
Elon Musk Mocks Nikola Motors as “Dumb.” Is He Right? - 23rd Jun 20
MICROSOFT Transforming from PC Software to Cloud Services AI, Deep Learning Giant - 23rd Jun 20
Stock Market Decline Resumes - 22nd Jun 20
Excellent Silver Seasonal Buying Opportunity Lies Directly Ahead - 22nd Jun 20
Where is the US Dollar trend headed ? - 22nd Jun 20
Most Shoppers have Stopped Following Supermarket Arrows, is Coughing the New Racism? - 22nd Jun 20

Market Oracle FREE Newsletter

AI Stocks 2020-2035 15 Year Trend Forecast

U.S. Wholesale Inventories Rise More than Expected; But Where's the Demand?

Economics / US Economy Sep 11, 2010 - 10:24 AM GMT

By: Mike_Shedlock

Economics

Best Financial Markets Analysis ArticleRising inventories to meet rising demand is one thing, rising inventories in the face of weak or falling consumer demand is another. On the inventory side of the equation, Wholesale Inventories in U.S. Rose More Than Forecast


Inventories at U.S. wholesalers rose in July by the most in two years as a rebound in demand prompted companies to add to stockpiles.

The 1.3 percent increase in the value of inventories was three times the median estimate in a Bloomberg News survey and followed a 0.3 percent gain the prior month, Commerce Department figures showed today in Washington. Sales at distributors climbed 0.6 percent, the most since April, after falling 0.5 percent.

Economists forecast inventories would increase 0.4 percent, following a previously reported 0.1 percent gain in June, according to the median of 32 projections in a Bloomberg survey. Estimates ranged from increases of 0.1 percent to 0.8 percent. The July gain was the biggest since July 2008.


Wholesalers make up about 30 percent of all business stockpiles. Factory inventories, which comprise more of the total, advanced 1 percent in July, the Commerce Department said last week. Retail stockpiles, which make up the rest, will be included in the Sept. 14 business inventories report.

Today’s report showed wholesalers’ stockpiles of durable goods, or those meant to last several years, increased 1 percent in July, led by gains in autos, furniture, machinery and metals.

The Commerce Department’s latest figures on gross domestic product showed the economy is getting less of a boost from inventories. Stockpiles added 0.63 percentage point to growth in the second quarter, compared with 2.64 percentage points in the prior three months and 2.83 percentage points in the fourth quarter.

Census Bureau Report

Inquiring minds are investigating the Census Bureau Trade Report for July 2010.

Inventories

Total inventories of merchant wholesalers, except manufacturers’ sales branches and offices, after adjustment for seasonal variations but not for price changes, were $405.0 billion at the end of July, up 1.3 percent (0.4%) from the revised June level and were up 2.5 percent (1.2%) from a year ago. The June preliminary estimate was revised upward $0.8 billion or 0.2 percent. End-of-month inventories of durable goods were up 1.0 percent (0.4%) from last month, but were virtually unchanged (1.6%)* from last July.

Inventories of metals and minerals, except petroleum were up 2.7 percent from last month and electrical and electronic goods were up 2.1 percent. End-of-month inventories of nondurable goods were up 1.7 percent (0.7%) from June and were up 6.4 percent (2.1%) compared to last July. Inventories of farm product raw materials were up 11.6 percent from last month and inventories of apparel, piece goods, and notions were up 4.1 percent.

Inventories/Sales Ratio


The July inventories/sales ratio for merchant wholesalers, except manufacturers’ sales branches and offices, based on seasonally adjusted da data, was 1.16. The July 2009 ratio was 1.27.


Looking Ahead

In terms of adding to GDP, the increase in inventories has played out, and in fact may have more than played out.

The Bloomberg article states "The amount of goods on hand compared with sales suggests manufacturing gains will be sustained in coming months."

I disagree.

Ignoring the effects of the credit bubble and housing bust in 2008-2009 the inventory to sales ratio is on the trendline from 2004-2010. What it suggests is manufacturers expect consumer sales to pick up in the second half or at least stay steady headed into next year.

Will Expectations Pan Out?

Expectations are one thing, reality will be another.

It is now September 10th, and the Census Report is for July.

In the meantime it's important to note Gallup Poll Shows Consumer Spending Pullback, Consumer Confidence Levels Below Depressed 2009 Levels ; Back-to-School Sales Bust Says WSJ

Not only are consumers are pulling back, a Wells Fargo/Gallup Small Business Index Hits Record Low, Future Expectations Dip Below Zero First Time Ever. If small businesses are not hiring, consumer sentiment will remain sour as will consumer spending.

There is no reason to expect consumer sentiment to change, or small business sentiment to change. Indeed, increasingly sour voters are likely to "throw the bums out" as noted in Voters Strongly Favor Non-Incumbent GOP Newcomers in Midterm Elections.

All of this adds up to an inventory build for consumer sales that will not happen. Expect more layoffs if sales do not materialize.

By Mike "Mish" Shedlock
http://globaleconomicanalysis.blogspot.com

Click Here To Scroll Thru My Recent Post List

Mike Shedlock / Mish is a registered investment advisor representative for SitkaPacific Capital Management . Sitka Pacific is an asset management firm whose goal is strong performance and low volatility, regardless of market direction.

Visit Sitka Pacific's Account Management Page to learn more about wealth management and capital preservation strategies of Sitka Pacific.

I do weekly podcasts every Thursday on HoweStreet and a brief 7 minute segment on Saturday on CKNW AM 980 in Vancouver.

When not writing about stocks or the economy I spends a great deal of time on photography and in the garden. I have over 80 magazine and book cover credits. Some of my Wisconsin and gardening images can be seen at MichaelShedlock.com .

© 2010 Mike Shedlock, All Rights Reserved.


© 2005-2019 http://www.MarketOracle.co.uk - The Market Oracle is a FREE Daily Financial Markets Analysis & Forecasting online publication.


Post Comment

Only logged in users are allowed to post comments. Register/ Log in

6 Critical Money Making Rules