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Stores Flooded With Merchandise But Inventories Rise Again, Huge Discounts Coming

Inventories are rising faster than sales across the board. Stores will soon be offering discounts.
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Inventory data from Commerce Department, chart by Mish

Inventory data from Commerce Department, chart by Mish

The Advance Inventory Data (preliminary) from the commerce department shows inventories continue to rise. 

Inventory Synopsis 

  • Merchant Wholesale Total: +2.1%
  • Merchant Durable Goods: +1.9%
  • Merchant Nondurable Goods: 2.3%
  • Retail Total: +0.7%
  • Retail Excluding Motor Vehicles and Parts: +1.7%
  • Retail Motor Motor Vehicles and Parts: -2.2%

The above numbers include revised March numbers. My chart reflects original March numbers except the advance April numbers.

Steep Discounts Coming

Reuters reports U.S. Retailers' Ballooning Inventories Set Stage for Deep Discounts

  • Costco Wholesale Corp (NASDAQ:COST) said its inventories ballooned 26% in its fiscal third quarter ended May 8 that included a "few hundred million dollars" of extra holiday merchandise and being a "little heavy" on small appliances and household items.
  • At Gap Inc (NYSE:GPS), a 34% spike in inventories was caused by poor sales at Old Navy and longer transit times for goods, CFO Katrina O'Connell said Thursday.
  • Similarly, Macy's (NYSE:M) CEO Jeff Gennette this week cited an "imbalance" in inventory. "Supply chain constraints relaxed," resulting in it receiving goods from overseas earlier "than we expected," he said. Meanwhile, shoppers changed buying patterns, buying fewer home items while snapping up occasion-based clothing and other merchandise.
  • Average retail inventories in the United States are rising at a faster pace than sales growth, according to Citi research on 18 retailers' first-quarter results as of May 22. At 11 of the 18, inventories rose by 10 percentage points more than sales did, according to Citi analyst Paul Lejuez. That is the widest gap since before the coronavirus pandemic began, illustrating a trend that began in March 2022.

Inventories Look Historically Lean Compared to Sales, But Appearances Deceive

Inventories and sales data from the commerce department, chart by Mish

Inventories and sales data from the commerce department, chart by Mish

I commented on sales yesterday in Inventories Look Historically Lean Compared to Sales, But Appearances Deceive

Top 20 Importers 

"List of top 20 container importers into US. Many on this list have excess inventories, which likely means their maritime volumes will drop as they work off excess inventory. The top 20 container importers represent approx 25% of maritime container volume imports into US."

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No Discounts?!

Contrarian Take 

The contrarian take will soon be mainstream. But will it help the CPI much?

In isolation, this data is deflationary. But it does nothing for food, little for energy, and nothing for rent. 

Rent is the CPI Gorilla

Rent and Owners' Equivalent Rent (OER) make up over 31% of the CPI.

The Fed will get a boost on rent from huge pipeline of housing units under construction. But how fast will those units come online? 

Hiousing Units Under Construction 2022-04

For discussion, please see New Homes For Sale Is a Poor Measure of Supply, What's the Real Supply?

This post originated at MishTalk.Com.

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