From the Census Bureau:
Total inventories of merchant wholesalers, except manufacturers’ sales branches and offices, after adjustment for seasonal variations but not for price changes, were $393.5 billion at the end of February, up 0.6 percent (+/-0.5%) from the revised January level, but were down 7.4 percent (+/-1.1%) from a year ago. The January preliminary estimate was revised upward $1.0 billion or 0.3 percent. End-of-month inventories of durable goods were up 0.5 percent (+/-0.7%)* from last month, but were down 12.3 percent (+/-1.2%) from last February. Inventories of computer and computer peripheral equipment and software were up 2.5 percent from last month and inventories of lumber and other construction materials were up 2.0 percent. End-of-month inventories of nondurable goods increased 0.8 percent (+/-0.5%) from January and were up 0.7 percent (+/-1.8%)* compared to last February. Inventories of petroleum and petroleum products were up 3.1 percent from last month and inventories of chemicals and allied products were up 2.9 percent.
This development is in line with how I predicted the economy would recover back in August of last year, when I wrote:
Inventories have dropped like a stone for roughly a year. At some point these will need to be replaced. While there is no indication the bottom has occurred yet at some point it will. And when that happens, another item of growth will be added to the equation.
In addition, the inventory to sales number is extremely lean:
This tells us the most likely scenario going forward is a further inventory build.
This bodes well for future growth:
Companies from Tiffany & Co. to Home Depot Inc. are restocking shelves in a move that will boost economic growth and may keep the recovery on track through 2010.Tiffany, based in New York, is planning for a “high single-digit percentage increase” in inventories this year as the world’s second-largest luxury jeweler retailer opens new stores, Chief Financial Officer James Fernandez told analysts March 22. Home Depot, the largest U.S. home-improvement retailer, “will be building inventory” this year in support of stronger sales, Carol Tome, chief financial officer of the Atlanta-based company, said on a Feb. 23 analysts call.
“We’re moving into the restocking phase,” said David Hensley, director of global economic coordination for JPMorgan Chase & Co. in New York. “We’ll see successive additions to growth in the first quarter, second quarter and third quarter.”
JPMorgan advised clients in an April 2 note to stick with a “recovery trade” that favors stocks over bonds and is overweight “cyclical” shares that will rise in an economic rebound. The XLY, or Consumer Discretionary Select Sector SPDR Fund, has risen 112 percent since the March 9, 2009, low. The exchange-traded fund includes Home Depot and Beaverton, Oregon- based Nike Inc., the world’s largest maker of athletic shoes.
“The particular area of the economy which people are not putting enough focus on is how significant this rebound of inventories is going to be,” former Federal Reserve Chairman Alan Greenspan said in an April 4 interview on ABC’s “This Week” program, adding that the odds of a double-dip recession “have fallen very significantly in the last two months.”
