Wednesday, September 15, 2004

Rumor on the street is that growth in manufacturers' inventories is good because it is a sign of optimism that sales will increase in the future. The flip side is that growth in retailers' inventories is bad because it is a sign of slumping sales. Today's new manufacturing and trade inventories and sales data for July tells a somewhat comforting story, but the broader picture is still one of concern.

Manufacturers' inventories (SA), 2004
January: +0.3%
February: +0.6%
March: +0.4%
April: +0.5%
May: +0.7%
June: +1.0%
July: +0.8%

Jan-July: +4.1%

Retailers' inventories (SA), 2004
January: unchanged
February: +0.7%
March: +1.2%
April: +1.3%
May: +0.1%
June: +1.2%
July: +0.6%

Jan-July '04: +5.2%

While July was certainly better than June, growth in retailers' inventories are heathily outpacing growth in manufacturers' inventories on the year. It turns out that retailers' inventories are also outpacing their sales by an even wider margin.

Retailers' sales (SA), 2004
January: +0.3%
February: +0.9%
March: +2.3%
April: -0.9%
May: +1.5%
June: -0.8%
July: +0.7%

Jan-July '04: +3.9%

April and June were particularly bad months for retailers in which sales tanked and inventories (predictably) soared. The August retail data released yesterday suggests we could see a repeat of April and June in the data to come.

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