Inventory To Sales Ratios Spell Trouble Three Ways


In light of the recent and unexpected decline in retail sales, let’s put a spotlight on the equally unexpected buildup in the inventory-to-sales ratio, three different ways.

Wholesalers Inventories-to-Sales Ratio

Inventories to Sales 2016-03-15

Retailers Inventories-to-Sales Ratio

Inventories to Sales 2016-03-15A

Total Business Inventories-to-Sales Ratio

Business Inventories 2016-03-15

One way or another these inventory buildups will be worked off.

  • Sales must improve
  • Production must decline
  • Some combination of the above
  • The obvious problem with number one is easy to explain: Retail Sales Down, January Sales Revised to -0.4%

    Bloomberg Econoday commented on retail sales as follows: “Consumer spending did not get off to a good start after all in 2016 as big downward revisions to January retail sales badly upstage respectable strength in February.

    Respectable Strength?

    Retail Sales 2016-03-15

    I also point out a net 10% of large corporations plan to reduce headcount in 2016.

    For details, please see 38% of Companies to Reduce Employment in 2016, Only 29% Expect Increase: Five Consequences.

    With hiring plans negative and with 82.8% Expecting Real Incomes Will Decline in 2016, faith in consumer willingness and ability to work off the buildup in inventories is quite a bit misplaced.

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