Inventories

The Lehmann Letter (SM)

This morning the Census Bureau announced that September sales and inventories (stocks of goods on shelves) had increased for manufacturers as well as wholesalers and retailers:

http://www.census.gov/mtis/www/data/pdf/mtis_current.pdf

That's good news on two grounds:

1. These businesses continue to show sales gains.

2. They also show sustained optimism as they rebuild their stocks of goods in anticipation of future sales growth.

Inventories piled up on the shelves as sales slumped during the recession. That's why the Inventory/Sales ratio rose precipitously. The ratio began to drop in 2009 when businesses slashed inventories to bring them in line with depleted sales. In 2010 as sales began to recover businesses started to restock their shelves once more.

This morning's report provides evidence that the trend continues. Business sales are growing and inventory-restocking is climbing even more rapidly. Businesses are selling and they anticipate selling even more in the near future. That's good news.

© 2010 Michael B. Lehmann