2 Things To Note About This Wicked Inventories Adjustment
The Commerce Department today released the April number for business inventories. The number dropped again to $1.385 trillion from a peak last August of $1.507 trillion. That’s a peak to trough (so far) decline of 8.1% in just 8 months, over 1% per month. Very steep.
Last recession (this data series only goes back to 1992) in 2001, inventories peaked at the end of January, 2001 at $1.2 trillion. They bottomed 7.5% lower in April, 2002, some 15 months later.
This inventory decline has been exceedlingly sharp in half the time.
Anecdotally, ( I love the anecdotal stuff) I was shopping in my local Wal-Mart yesterday (117th and Metcalf Ave.). Normally there are two aisles crammed with seasonal and promotion merch. DVDs, DVD players, TVs, boomboxes, sunglasses, coolers, watches in one aisle. Lotions, creams, shampoos and beauty care products stacked in the middle of the other aisle.
Yesterday? Nothing! Not one box. Nothing. Zip. Nada. The first aisle was about 3 bowling alleys wide, and the floors were just sparkling clean. But no merch. At all. The second aisle same. Not quite as wide, maybe two bowling alleys, but zero. Kids running freely. I’ve been shopping this store since 1994. Never seen it like this.
Hear this prediction: When this economy turns, it will be surprisingly strong. Inventories and production are going to ramp up. We are already seeing some signs of this.
Final note: Recall that the stock market didn’t bottom until October of 2002, six months after inventories bottomed. I think we’ve got a leading indicator here.
