Contact us
CALL US NOW 1-888-GOLD-160
(1-888-465-3160)

Another Bad Sign for the Economy: Wholesale Inventories Surge Again

  by    0   1

On Friday, the yield curve inverted, often a warning sign of an impending recession. Many mainstream pundits say we shouldn’t be concerned about the inversion and that the US economy is still healthy. They say there are other underlying reasons for the inverted yield curve. But there are plenty of other economic data points that are flashing recession warnings. For instance, inventories are piling up in warehouses.

Wholesale inventories surged again in January, according to the latest Commerce Department data.

This comes on the heels of the largest gain in wholesale inventories in more than five years in December.

Inventories rose 7.7% from a year ago in January. Meanwhile, sales only rose by 2.7%. Overall, total inventories were $669.9 billion at the end of January, up 1.2% from the revised December level.

The increase in durable goods inventories at the wholesale level was even starker. These inventories were up 11.7% from January a year ago, and are up 17% from January two years ago, hitting $415 billion, the highest ever. Sales of durable goods were up 4.7% but as Wolf Street explains, the important number is the inventory-to-sales ratio — and it’s not good.

The inventory-to-sales ratio for durable goods rose to 1.69 in January, the highest ratio since August 2016, back when the goods-based sector was coming out of the last inventory pileup that had led to the recession in the goods-based sector that had dragged down overall economic growth for 2016 to just 1.6%, the worst since the Financial Crisis.”

The service sector kept the US economy from falling into a recession during the last durable goods slowdown.

An inventory pileup is a leading indicator of economic activity. It indicates that things are slowing down. People aren’t buying stuff and it’s piling up in warehouses. Eventually, this will ripple back through the economy, as Wolf Street explains.

When inventories pile up, sales by those companies that supply that inventory do well. But companies that sit on that inventory and have trouble selling it will at some point cut their orders to reduce their inventories. When this happens, sales drop all the way up the supply chain.”

An article published by FX Steet features a quote from Econoday that puts the inventory numbers in stark terms.

There are few indications of economic slowing that are more convincing than an unwanted build in inventories — and that apparently is what’s underway in the wholesale sector. Wholesale inventories jumped 1.2% in January to far exceed anyone’s expectations and are up 7.7% year-on-year. Confirmation that this is unwanted comes from sales in the sector which did rise 0.5 percent in January but follow a long stretch of contraction. Year-on-year, sales are up only 2.7%. The sector’s stock-to-sales ratio continues to climb, at 1.34 vs 1.33 in December and against 1.28 in January last year. Today’s data confirm the wisdom of the Federal Reserve’s cautious outlook.”

Gold IRA Rollover to 401k

Get Peter Schiff’s most important Gold headlines once per week – click here – for a free subscription to his exclusive weekly email updates.
Interested in learning how to buy gold and buy silver?
Call 1-888-GOLD-160 and speak with a Precious Metals Specialist today!


Related Posts

Taxpayers on the Hook for $435 Billion in Student Loan Losses

US taxpayers are on the hook for a $435 billion loss on the $1.37 trillion in student loans that were on the government’s books at the beginning of this year, according to an internal study by the Department of Education recently reported by the Wall Street Journal. That’s before any loan forgiveness program that might […]

READ MORE →

Money Is Not Wealth

When governments started locking down the economy in response to coronavirus, the Federal Reserve sprung into action. First, it slashed interest rates to zero. Then it quickly launched what we’ve dubbed QE infinity. In effect, that meant printing trillions of dollars out of thin air and pumping them into the economy. Meanwhile, the US government […]

READ MORE →

The Fed Now Holds a Record Percentage of US Debt

The US government has borrowed $4.2 trillion in the last 12 months, pushing the total national debt to over $27 trillion. In order for Uncle Sam to borrow, somebody has to lend. So, who is buying all of these government bonds? Foreign and domestic investors, commercial banks and US government entities all buy US debt, […]

READ MORE →

Silver Investment Demand Expected to Hit Five-Year High

Physical silver investment is expected to surge by 27% this year, according to the latest data released by the Silver Institute. Demand for investment silver is projected to come in at 236.8 million ounces in 2020. That would mark a 5-year high.

READ MORE →

The Fed Has No Way Out

We have argued that the Federal Reserve has no exit strategy from this extraordinary monetary policy. In fact, it never could extricate itself from the extraordinary monetary policy it launched during the Great Recession. Today, we’re merely witnessing the same policy on hyperdrive. And there is still no way out.

READ MORE →

Comments are closed.

Call Now