Total inventories at all retailers, from auto dealers to supermarkets, fell to $598 billion in May, seasonally adjusted, down 9.8% from May 2019, the third month in a row of declines, but still up from the low in June last year. These inventories in May, and retail sales in May – which had declined from April – produced the second lowest inventory-sales ratio in the history of the data going back to 1992, the lowest having been in April…
Turns out, when the US government spends $5 trillion in borrowed fiscal stimulus over 16 months, and the Fed hands out $4 trillion in monetary stimulus over the same period, causing asset prices to boom, demand for goods is going to wash over the land in tsunami-like waves, and supply chains that snake all over the world, amid finely honed just-in-time-inventory strategies, get tangled up. And as retail sales spiked in a historic manner, shortages of all kinds have been cropping up, including the semiconductor shortage that has slammed the auto industry with a vengeance.
Inventories at retailers document this mess. Inventories are tight all around, but they’re in catastrophic condition at auto dealers, which before the pandemic accounted for over one-third of total retail inventories.
Inventories at new vehicle dealers, used vehicle dealers, and parts dealers fell to $153 billion in May, down 36% from May 2019, according to data released by the Census Bureau on Friday. And the inventory-sales ratio – with inventories and sales both in dollars, the impact of inflation gets canceled out – dropped to 1.14, the lowest level in the data going back to 1992… (Read more….)