More Backwards Economics By Lunatic Economic Writers! Inventories Increased In The US!!!!!

image

So, we’re celebrating meaningless numbers while ignoring meaningful numbers ……

Great news!!!!

US businesses rebuild stockpiles at steady pace

WASHINGTON (AP) — U.S. companies restocked their store shelves and warehouses at a steady pace in May, a sign they expect sales will remain solid in the months ahead.

Business stockpiles rose 0.5 percent in May, the Commerce Department said Tuesday. That was down slightly from a 0.6 percent gain in the previous month. April’s increase was the highest in six months. Total business sales rose 0.4 percent, much lower than April’s 0.8

Yeh …..

You have to read on to see the pertinent figures. 

For May, inventories at the wholesale level climbed 0.5 percent, while inventories held by retailers ticked up just 0.2 percent. Stockpiles held by manufacturers rose 0.8 percent.

Let me reword this paragraph into something comprehensible. 

The stockpiles of the US manufacturers rose by 0.8%.  They make wholesale goods.  The wholesale sellers’ inventories only rose by 0.5%.  Those would be the people who sell to the retailers.  The retailers’ inventories only rose by 0.2%. 

So, the manufacturers are accumulating inventory at a much fast rate than the retailers can sell their inventories. 

Yeh, that’s probably not good news.  Typically, manufacturers don’t like having a bunch of crap laying around in their plant which doesn’t move.  When I say “typically”, that’s like they never want a bunch of crap laying around in their plants.  Never.  They won’t increase more than retailers very long, because they can’t stay in business by accumulating more than retailers. 

On a personal experience note.

I make a $40,000 part for a manufacturer, which sells it to a wholesaler, which sells it to a retailer.  The retailer doesn’t sell the part, but, uses the part to make their money.  The plant I work in …. nothing throws them into a tizzy like having one of those parts I helped make just sitting around in the plant.  They don’t want it there, they hate it being there, they want it moved out the door. 

What many people don’t understand is that most big businesses don’t plan very well.  They are reactive, rather than pro-active.  This is mostly because the world is hard to predict and much of the events around the world are well beyond the scope and knowledge of the people engaged in manufacturing …. well, just about anything. 

Specifically, my new job is making airplane parts (for a particular passenger jet) from titanium.  Consider what this entails in order to be a profitable venture.  It’s scope goes well beyond the price of titanium, cost of labor, and demand.  Where do we get our titanium from?  What’s going on in that part of the world?  Is it stable?  What are the economies doing  in other parts of the world?  How’s the tourist industries in these parts of the world?  What are the various government policies towards the air-travel industry?  How will they be in the near future?

Most of these questions, one can’t possibly know towards the future.  What one does know is that all of these considerations are subject to change in a moment’s notice.  Manufacturers hate accumulating inventory.  They do so very reluctantly and only if they absolutely do know of increased demand (contract signing) or if they can’t help it (reduction in sales). 

With a 0.2% increase in the retailers’ inventory, it’s impossible that manufacturers would increase by 0.8% on hopes of a good selling season. 

How do manufacturers react to inventory laying about in their plants? ……. Great news!!!! 

About these ads
This entry was posted in Economics. Bookmark the permalink.

11 Responses to More Backwards Economics By Lunatic Economic Writers! Inventories Increased In The US!!!!!

  1. philjourdan says:

    It is not “economists”. YOu can find an idiot to say anything (just get krugman for the stupidest things). The MSM is spouting the meme and then finding the idiots to back them up.

  2. Question, are those kegs filled with the famous Kansas ‘Muehlebach Lager’?

    • suyts says:

      LOL, …..well, that was a “Kansas City” brewery. But, in the Misery …. sorry, Missouri part of KC.

      No worries, Alfred, I’m planning on starting a micro, and we can then have a truly Kansas beer!

  3. cdquarles says:

    Actually, James, businesses really don’t need to plan very well to have things work out. They simply need to manage their costs well enough and borrow as little as possible :). What really kills business is an environment where you can’t rely on contracts to be enforced and for the basic rules of the game to be simple and fixed.

    No economic actor has, in the end, any more knowledge or prescience than any other actor. All have to act under uncertainty. What helps is when the uncertainty can be minimized in terms of the civil society and its laws/regulations.

    • suyts says:

      Which is why increasing manufacturing inventory more than retail is not good news.
      And, yes, I agree, they don’t need to plan. When I wrote “What many people don’t understand is that most big businesses don’t plan very well.” I was implying that they didn’t need to. If they don’t plan very well, but, needed to, then they couldn’t get very big.

      I also agree the uncertainty is minimized by laws and regulations, until the rate of new laws and regulations increase beyond what the businesses can cope with. But, I know you know that. ;)

  4. Bruce of Newcastle says:

    Where do we get our titanium from?
    Russia, Japan and China, who make much the Ti sponge that is refined in the US.

    What’s going on in that part of the world?
    Heh.

    Is it stable?
    AHAHAHAHAHAHAHA!

    On the other hand the US has learnt how to make planes out of plastic, which is fortunate.

    To be a bit more serious, titanium is lovely stuff. I’ve used a lot in my work over the years, including plate, barstock and lots of sheet for anodes. I accidentally reinvented anodising once when I used an uncoated sheet in an electrical cell. The cell stopped passing electricity, the voltage went off scale of the multimeter in a few seconds and when I pulled out the titanium is was the most beautiful shade of bright purple…so I went back to using coated anodes.

  5. DirkH says:

    Hey look what I found.
    Satanists (Alice Bailey satanists; not just some wannabe satanists) collaborate with the UN to make plans for a sustainable future.
    I didn’t find it on an obscure nutjob site.
    It’s in the wikipedia.
    http://en.wikipedia.org/wiki/Lucis_Trust
    “As part of the World Goodwill at the UN project, they are developing a process of defining new Sustainable Development Goals for humanity after 2015 when the Millennium Development Goals expire.”

    I gotta stop looking around, there’s just too much crazyness going on.

Leave a Reply

Fill in your details below or click an icon to log in:

WordPress.com Logo

You are commenting using your WordPress.com account. Log Out / Change )

Twitter picture

You are commenting using your Twitter account. Log Out / Change )

Facebook photo

You are commenting using your Facebook account. Log Out / Change )

Google+ photo

You are commenting using your Google+ account. Log Out / Change )

Connecting to %s