Somehow last week got away from me, perhaps too much sun in Florida the week prior, so I did not post this on Thursday as I would have liked. On March 13, 2013 the census bureau released the numbers showing the total business inventories to sales ratio for January. If you remember, I posted the wholesale numbers a few days back at this post and said I was getting concerned about the inventory levels backing up in the supply chain.
This number did not fail me and as you can see by the chart above, the ratio continues to climb albeit ever so slowly. The bottom line is either sales are going to have to pick up dramatically or the production machine is going to have to slow down. And, of course, the latter is not good for the transportation industry as a whole. While it may be good for those in the procurement roles trying to get capacity I think everyone would say they would rather have a robust economy.
Of course this data is for January and much has happened since then. It certainly does appear either the economy has truly started to pick up or anticipated euphoria is at least moving the stock market forward.
One item I would watch closely however is
consumer credit. While sales may be picking up in February and March (numbers next month will show us if this is a trend as I anticipate it will be) we are seeing a large growth in consumer credit again (7% growth in January as reported by the
Federal Reserve). This means the consumer, for the most part, is starting to leverage again and we all know this cannot sustain itself. The recession caused the consumer to "de-leverage" a lot and now it appears the consumer is back to being willing to leverage themselves.
Beware the borrowing!
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