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Economy in Brief
Japan's Inflation Shows Mixed Gains
Japan's inflation rose by 0.4% in July...
U.S. Existing Home Sales Continue to Fall in July
Existing home sales declined 5.9% (-20.2% y/y) in July to 4.810 million units...
U.S. Index of Leading Indicators Fell Again in July
The Conference Board's Composite Leading Economic Indicators Index fell 0.4% m/m...
U.S. Philly Fed General Activity Index Back to Positive Reading in August
The current general activity diffusion index rose nearly 19 points in August to 6.2...
U.S. Unemployment Claims Slightly Lower
Initial claims for unemployment insurance went down 2,000 in the week ended August 13 to 250,000...
Viewpoints
Commentaries are the opinions of the author and do not reflect the views of Haver Analytics.
The first thing we see in inventory trends is that inventories have stopped the increase in their rate of growth. Inventories are still growing. But Yr/Yr growth rates have either stabilized or declined. For wholesalers the pace seems to have declined, whereas for manufacturers and retailers the pace of growth has been cut. This is largely because sales have slowed (see next chart). In this chart we see Yr/Yr growth plots of sales by sector. Sales growth rates are sliding across all sectors but the slide has halted for wholesalers, who also have stopped cutting their growth rate for inventories, as we saw above.Adequacy of inventory growth. To assess inventories I like to look at a growth rates for inventories Vs sales. I will show some of the more conventional I:S ratios for retailing later, but as an overview the growth rates when paired are important way to get a fix on what is going on with the dynamic interplay between inventories and sales. I:S ratios only show a relationship that is static. While we can compare the static ratios of today to past static relationships it does not give any idea how inventories are shifting relative to sales. The chart above does that. It looks at different time horizons comparing by sectors inventory growth rates to sales growth rates. And while (as we saw already) Yr/Yr growth rates show all inventory rates of growth reside above their respective sales rates of growth, over the three month horizon, sales growth exceeds inventory growth as of January, at least. Over six-months, wholesale sales growth still exceeds wholesale inventory growth. And, while inventories in each sector outgrow sales Yr/Yr just a year before that (see table) the opposite was true. What this chart demonstrates is how the current inventory imbalance is probably minor. The Yr/Yr growth imbalances are worst for manufacturers where Yr/Yr sales are actually lower with inventories growing at 5.7% pace. And over the last three-months it is clear that whatever the I:S ratio -- the imbalance between inventories and sales is being repaired by relatively faster sales growth across the board. ![]() ![]() ![]() |