Tuesday, August 10, 2010

Wholesale Inventory to Sales Ratio Near All Time Low

One area businesses have focused on is not getting stuck with high inventory levels in the event the economy takes a double dip. At this point in time, at HORAN, we are not in the double dip camp.

As the below chart details, the wholesale inventory to sales ratio is near a record low at 1.15:1.

From HORAN Capital Advisors

If we continue to see an improving trend in consumer sentiment, sales activity would likely improve.

From HORAN Capital Advisors

This higher demand on inventory at a time when inventories have been reduced may lead to upward pressure on selling prices. Today it was noted that Wal-Mart (WMT) has been raising prices by an average of 6% in some markets. The company cites lower sales as the reason; however, one wonders if tight supplies are driving the pricing decision as well.

On Friday retail sales and business inventories will be released. Business inventories are expected to increase .2% and retail sales are expected to be higher by .5%. This would result in a decline in the business inventory to retail sales ratio. The detailed report can be found on the U.S. Census Bureau/Department of Commerce website.

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