A couple of months ago the chatterati could talk about nothing but supply chain problems causing shortages of consumer goods. Now, with whip snapping speed, everything has changed. Suddenly the conversation is all about gluts:
The big-box retailer Target said Tuesday that it’s having inventory troubles. Target has a lot of stuff, including furniture and appliances, that nobody seems to want to buy. And it’s not the only company sitting on too much of the wrong goods.
Damn. That was a fast turnaround:
B of A writes about the “End of All Shortages. .. Every AUTO OEM expects semi supply to improve in 2H22 .. Housing inventory is picking up .. the labor shortage will ease; $UBER has reported accelerating ‘driver supply’ .. Here’s a chart showing Retail Inventories surging ..” pic.twitter.com/DMkT0L5FVk
— Carl Quintanilla (@carlquintanilla) June 13, 2022
WTF? The usual metric for this is the inventory/sales ratio, and as of March it was still well below its pre-pandemic level:
Has the IS ratio really surged since March not just to 1.20 or so, but so far beyond it that retailers are now complaining about bulging warehouses? All in eight weeks?
As for autos, we don't need to bother with ratios or anything else. The drop in inventories is so stark that we can just look at units:
If Target says they have too much inventory, I believe them. If auto suppliers and dealers expect inventories to recover from historic depths within a couple of months, they must have good reason for thinking so. But this is sure the mother of all dizzying turnarounds.
Well there you go...reason for optimism that inflation will be flattened by excess goods.
don't worry, food and energy will only get worse so we'll have plenty of problems
Energy?? Talk about overvalued assets.
Other drivers - energy and food with hard binding constrains of actual physical limits on production / physical availability to respond to price signals (thank you Putin) are going to be enormous.
This is analytically similar to the 1970s oil shock from OPEC action, and in some ways structurally more risky as the combined food-oil/hydrocarbons shock is more subject to the whims and nationalist-strategic "Great Tsar Putin" calculations than the 1970s shock.
Ongoing Lefty dreaming that inflation is passing is a significant miscalculation that is putting you on wrong foot relative to Righty attacks (which after being utterly wrong on inflation for ages are now correct, it may well be "stopped clock" phenomena, but the clock is where it is...)
You have absolutely no idea what you're talking about, do you? My jaw dropped the other day when you disparaged someone as nummerate after their -- on point and accurate -- assessment of the shop Nate Sliver's running at 538.
No idea, no I do not have No Idea, I have plenty of them. Of course as a proper economist, such ideas are not grounded in partisan political views.
By the way, the word is "innumerate" or you may say also 'math challenged", numerate is the opposite meaning.
Not really the May move which created your illusionary inflation was price fraud. We are refining at 2019 levels. It's pure fraud and globalism. Losers like you that cannot get that are part of the problem.
Apparently tampons are hard to find on the shelves. The failure to anticipate this crisis is another blow to the White House's credibility. https://edition.cnn.com/2022/06/10/business/tampon-shortage-amy-schumer-tampax/index.html
Not new. There were complaints in late 2020 over this.
joebiden will learn not to mess with kotexas.
The Biden import price cuts will cheapen domestic manufacturing.
Still have spot shortages....but people are starting to go out now and no more room for yet another TV.
It's getting so bad, they might even have to have....oh, I hate four-letter words...a "s-a-l-e".
Inventory is in $$$, so inflation also inflates value of inventory. The inventory to sales ratio is effectively adjusted for inflation.
I suppose part of the problem is that they have to order ahead, and if they've ordered enough to cover pandemic levels of consumer spending and we've dropped back to pre-pandemic levels, then more goods will be piling up in warehouses.
I would also imagine a non-trivial percentage of households simply can no longer afford to shop for non-essentials. Hundred dollar trips to the gas station will tend to do that.
People have been saying this for many months, haven't they? And yet, households across the income spectrum keep spending....without any significant increase in consumer debt.
While the economic press has been assuring us of inflation doom for months, the economy and households appear to be chugging along just fine.
Something that's missing from the doomsayers is how little Americans were spending on gasoline in Jan/Feb 2022 compared to the past. A dramatic increase in gasoline spending still leaves us spending less on gasoline than we did at any point in the 60's, 70's, 80's and the stretch from 2005 to 2015.
Not to say there is no impact....
https://fred.stlouisfed.org/graph/fredgraph.png?g=QvOt
Gasoline spending as a portion of total consumer spending. This is only through March, although gas was already up significantly at that point.
overall spending same or maybe even up--but they are getting less. stuff now due to inflation.
Also, the Atlantic has a friendly reminder that venture capital subsidies are going away--all those delivery and ride services have to start making money now.
https://www.theatlantic.com/newsletters/archive/2022/06/uber-ride-share-prices-high-inflation/661250/
But what is really inflation???? Why do you u trust said number.
Has the IS ratio really surged since March not just to 1.20 or so, but so far beyond it that retailers are now complaining about bulging warehouses? All in eight weeks?
It's not a dizzying turnaround, Kevin. Although it's a reasonably brisk one (the US economy is a pretty amazing beast, all things considered).
Much more likely is that the data collection wasn't (isn't) as reliable as we'd like, and the signs of improvement in recent months largely went unnoticed.
Precisely.
Not dizzying if one is an actor in actual physical product industry.
And of course data collection - USA and otherwise - is rather a messier and more human process than 10,000 feet level analyses usually understand and allow (not as in falsification but in time delays, in ordinary error: as in some actual human beings in large segments of industry have to spend the time aggregating and sending - and often they have other urgent shit to do, so... lags, inaccuracies, etc.)
Whiplashes between over-and-under inventory in the face of instable trends is not a surprise, it's 100% what should be analytically expected.
This is actually part of the economic danger.
If one has a background in acctual physical product and industry, there is nothing confusing nor surprising here. Overshoot (as much as undershoot) due to time differential between order placement and delivery is completely expected - as well as due to the time delays in data collection (people tend to have a quite magical understanding of data, as if it generates itself, or is somehow greatly automated - where in fact there is a quite fuzzy and messy and human process. Certainly large entities are more automated but even there...).
It is all the more expected in a real world state where there is a lot of volatility in the actors behaviour - with inflation and other factors driving faster-than-typical changes / out-of-typical-cycle-changes which companies can not fully anticipate.
Dean Baker has been talking about oversupply for some time. Part of this is inventory parked in containers waiting to offload and be delivered.
I'm seeing evidence in some things I purchase that prices are coming down, except for gasoline. This morning I bought a bunch of different things on sale at the supermarket that weren't on sale just a few days ago. In some cases the prices are back to where they were or even below the beginning of the year. Same thing with some Amazon purchases I made recently. Several items were priced below what I paid for them the last time I ordered.
In a sane world, this would mean SALES. Reduced prices on the excess-inventory products. But that might benefit the Democrats! What to do, what to do...
I suspect, but have neither the model-building chops, the data, nor the processing power to declare, that this is something akin to what the rocket boys call 'pogoing'. Let us pray that the ride not get so bumpy it shakes the economic engine apart.
Stocks are dropping again (could change by end of day)....
Let's see--inflation bad and interests rates will got up
or...
Inventory glut means companies are losing pricing power and prices might come down, hurting profits....
Economies are cyclic. Production is cyclic. When sales are good, a lot of stuff is produced, a lot of stuff is mined, etc. Then when things are bad there is a glut. Production eventually drops off and there is not enough stuff for the following recovery. Whether the current media story, based as usual largely on anecdote, is correct or not no one should be surprised when things do shift rapidly from shortage to glut - it's normal.
I think the "standard answer" is now woefully inadequate.
I think the old correlations no longer exist.
Due to the more rapid than expected loss of Baby Boomers filling jobs we now have an imbalance of too much demand and not enough capability for supply to meet that demand. This. of course was made worse by Just-in-Time and other so-called efficiency programs. Once we lost the ability to produce coupled with the boomers STILL EXPECTING goods and services to be available we shifted our economy to no longer be balanced
I think the Target situation may be different in that THEY made the mistake of bulking up on the wrong things because they THOUGHT that supply would catch up but it just didn't happen.
Semiconductor manufacturing was the first economic victim of the pandemic. The supply chains themselves were the second victims. As prices began to rise consumers then got ill as wave upon wave battered us here at home. Now that just about all sectors have come to grips with COVID there's just NOT enough producers left to make the products that we demand in the quantities needed to keep our shelves stocked or new car lots full.
We need to get back into balance where minor ripples in population don't cause huge ripples in supply and demand.
That won't happen until the boomers are gone
That's only true if there's no planning and no counter-cyclical spending or action.
There doesn't need to be boom bust. We're not rats.
Crissa
I some cases it's plain stupidity
We COULD expand inventories almost infinitely for many goods but we don't because it's not in any company's best interest to have 90 day supply on hand for just about anything.
For food goods how long can you keep them edible? (never mind palatable)
How long can we keep COVID vaccines?
So now the ability to build enough products, and to ship enough products is solely reliant on having the PEOPLE available to make it happen and we just don't have enough working aged people to do this UNTIL the demand dies off. COVID pointed this out to us
In the past we had more producers along with more people who demand goods because they were one and the same group. Now that group is majority of DEMAND side but relatively minuscule part of the supply side.
The re-balancing has to take place, OR, our retirees have to limit their demands for goods and services to match what we can produce and/or store for future demand.
I think a lot of supply chain issues are more specific to certain types of items than we expect, especially since we've seen so much of it and it's been happening so frequently. I think it's certainly likely that Target may right now have too much of one thing (like furniture) while being short on other items. The semiconductor issue also might have gotten better.
But these wild swings are going to make it tough for individual manufacturers to predict what to make, which will exacerbate the problem.
Nasdaq.com has a better take on this: "Target bought too much of the wrong stuff." So... it has nothing to do with the supply chain, and everything to do with guessing wrong about the buying trends of customers before, during, and after the pandemic. Source: https://bit.ly/3HhNPcf
If they're anything like some local shops, they kept ordering more and more - to cover losses and gaps in shipments - until everything arrived, and all the people who were buying stuff already found what they wanted.