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