Tuesday, June 10, 2014
Wholesale Inventories In-Shape for only Modest Growth
Back in October of last year, wholesale inventories were just above current levels, having risen smartly from the May ’13 low. The advance in wholesale inventories over that period was initially intended, but became problematic and unintended accumulations by late in the third quarter. Sales (wholesale) which had held up well March through May began to shrink after Mr. Bernanke, without offering any valuable guidance, blurted out the Fed may begin tapering security purchases.
Although sales started to decline, production continued to run strong and inventories reached uninviting levels into a period of heightened anxiety brought on by ‘fiscal-folly’ as our esteemed national leaders failed to agree on budgetary and deficit levels. Those more anxious times for producers, as well as consumers and investors, coupled with reduced housing activity on the back of rising mortgage rates caused a real drag on economic growth just as Mother Nature seemed to ask for her pound of flesh in the severe winter weather.
Of course sales plunged into negative territory in January, but have since recovered smartly. This will invite producers to consider once again making voluntary or intended increases in inventory holdings, thus expanding production, hiring and wage income.
Wholesale inventories have adjusted for modest growth. However, any long-awaited revival of household spending (Friday Retail Sales Report) will find stores depleted quickly.