Socio-Economics History Blog

Socio-Economics History Blog

Last Time that Ratio Soared like this, Stocks Crashed

by mosesman

US-Wholesale-inventories-sales-ratio-2005_2015-08-Lehman

  • Last Time that Ratio Soared like this, Stocks Crashed
    by  • October 9, 2015, http://wolfstreet.com/
    This was a data set we didn’t need. Not one bit. It mauled our hopes. But the US Census Bureau dished it up anyway: wholesales declined again, inventories rose again, and the inventory-to-sales ratio reached Lehman-moment levels.
    –
    In August, wholesales dropped to $445.4 billion, seasonally adjusted. Down 1.0% from July and down 4.7% from August last year.
    –
    It was ugly all around. Wholesales of durable goods dropped 1.2% for the month, and 1.9% year over year. The standouts: Computer and computer peripheral equipment and software plunged 5.1% for the month and 6.2% year-over-year. Machinery sales dropped 2.7% from July and 3.5% year-over-year. Both are the signature of our ongoing phenomenal white-hot high-tech investment boom in corporate America, focused more on financial engineering than actual engineering.
    –
    Wholesales of non-durable goods fell 0.7% for the month and plunged 7.2% year-over year! Standouts: petroleum products (-36.6% year-over-year) and farm products (-12.4% year-over-year). They’ve gotten hammered by the commodities rout.
    –
    But the pharmaceutical industry is where resourcefulness shines. At $52 billion in wholesales, drugs are the largest category, durable or non-durable. And sales rose another 0.9% for the month and jumped 14% from a year ago! Price increases in an often monopolistic market can perform stunning miracles. Without them, wholesales would have looked a lot worse!
    –
    Falling sales are bad enough. But ominously, inventories continued to rise from already high levels to $583.8 billion and are now 4.1% higher than a year ago.
    –
    Durable goods inventories rose 0.3% for the month and 4.2% year-over-year, with automotive inventories jumping 13.5% year-over-year. Non-durable goods inventories are now 4.0% higher than a year ago, with drugs (+5.4%), apparel (+11.6%), and chemicals (+7.9%) leading the way. But petroleum products inventories dropped 21.9% year-over-year.
    –
    The crucial inventory-to-sales ratio, which shows how long merchandise gets hung up before it is finally sold, has been getting worse and worse. In July last year, it was 1.17. It hit 1.22 in December. Then it spiked. In August, it rose to 1.31, the level it had reached just after the Lehman moment in 2008:
    –
    read more.

end