(March 13, 2008) – The Census Bureau released their Manufacturing and Trade Inventories and Sales: January 2008 report, announcing that seasonally adjusted business inventories rose 0.8% in January 2008, to $1,457.9 billion, an increase of 4.8% from January 2007. Sales increased 1.5% to $1,163.5 billion from December, an increase of 8.6% year-over-year. The total business inventories/sales ratio based on seasonally adjusted data at the end of January was 1.25, down from 1.30 a year earlier.
January sales went up for manufacturers (1.1%), wholesalers (2.7%), retailers (0.5%) and total business (1.5%). Inventories rose more slowly than sales. But remember that all are seasonally adjusted numbers, which can be dramatically different than unadjusted numbers. Unadjusted total sales in January, for example, fell by 7.2% but seasonally adjusted total sales increased 1.5%. For retailers, the difference is more striking; unadjusted -20.5%, adjusted +0.5%. I’m not saying the seasonal adjustments are wrong, just that they are big and, at a time of a major event in the economy, could be misleading.
But all in all it was a pretty good report showing that excess inventories are not a big issue. That’s why I keep telling people this is not a textbook recession, where consumers buy less stuff, inventories of stuff pile up on retailers shelves, wholesalers warehouses and manufacturers shipping docks, and factories lay off their workers because they have more stuff than they need. Our problems today stem from a blockage in the capital markets. Textbook recession policies won’t fix it. We need capital market-specific fixes for this one.
JR
