August Manufacturing and Trade Inventories and Sales: Eighth Straight Month of Year-Over-Year Sales Declines; Inventory/Sales Ratio Remains in Dangerous Territory
The predictions focus on what happened to inventories (either flat or up 0.1 percent), but the far more important question is whether sales have picked up.
Here is the opening summary in the Census Bureau’s August report:
Sales. The U.S. Census Bureau announced today that the combined value of distributive trade sales and manufacturers’ shipments for August, adjusted for seasonal and trading-day differences but not for price changes, was estimated at $1,320.5 billion, down 0.6 percent (±0.2%) from July 2015 and was down 3.1 percent (±0.5%) from August 2014.
Inventories. Manufacturers’ and trade inventories, adjusted for seasonal variations but not for price changes, were estimated at an end-of-month level of $1,811.0 billion, virtually unchanged (±0.1%)* from July 2015, but were up 2.4 percent (±0.5%) from August 2014.
Inventories/Sales Ratio. The total business inventories/sales ratio based on seasonally adjusted data at the end of August was 1.37. The August 2014 ratio was 1.30.
There is no good news here.
Additionally, regardless of whether the calculations are being done correctly, the results of seasonalization, as bad as they look, are covering up an even worse underlying reality:
The boxed months of May and August show that actual (i.e., not seasonally adjusted) 2015 sales came in lower than the figures seen two years earlier — yet seasonally adjusted sales this year are higher than the figures seen two years ago. Again, regardless of whether the calcs have been done correctly, that’s a load of horse manure.
The seasonally adjusted figures are what get loaded into the estimates of GDP growth. From here, it sure looks like third-quarter GDP will be inherently overstated.
________________________________
UPDATE: Zero Hedge comments on the Inventory/Sales Ratio (bolds is theirs) —
Recession Looms – Business Inventories-to-Sales Surge To Cycle Highs
… clearly no inventory liquidation has started yet (so the pain is yet to come) and this has driven the inventory-to-sales ratio up to 1.37x – the highest in this cycle. The last 2 times the ratio was at this level, the US was in recession.
