Record Gap Between US Inventories And Sales Screams Recession

Tyler Durden's picture

The Wholesale Inventories-to-Sales ratio has now been stuck deep in recession territory since January as the malinvestment boom-driven deflation-beckoning dream of "if we build it they will come" inventory surges smashes into the ugly reality of peak-debt-based lack of consumption worldwide. Inventories dropped 0.1% in July (notably lower than the 0.3% rise expected and the biggest drop since May 2013), but worse still Wholesale Sales tumbled 0.3% (missing expectations of a 0.1% rise). So inventories dropped (bad for Q3 GDP) and sales dropped more (even worse) leaving July's 1.30x inventories-to-sales ratio remains a flashing red beacon of over-capacity and looming production cuts (especially in Automakers).

 

Recession looms...

 

The absolute dollar size of the gap between Inventories and Sales has never been bigger and is the biggest flashing red light that an economic recession is now inevitable as part of the massive destocking, likely at deflationary dumping prices, that has to take place.

 

Led by Automakers over-building:

 

And sending ominous signals for Q3 GDP...

 

In short, the Fed's timing for a rate hike couldn't be better.

Charts: Bloomberg

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kliguy38's picture

Depression

Recovery

VinceFostersGhost's picture

 

 

We're holding a candlelight ceremony for our local mall. If you're not doing anything.....and you're probably not, come and join us.

Oh regional Indian's picture

Recession looms?

Depression IS! 

Abject societal breakdown is what looms...

 

Soul Glow's picture

Our culture is fucked and our society is doomed.  This is what we get for worshipping politicians as saviors.

Oh regional Indian's picture

It's true the world over SG.

Modern Religions have fostered a messiah will deliver us all mentality....

People are stuck...

TBT or not TBT's picture

My culture works just fine.  FSA culture is what is fucked.   That can be reversed.   The nuts who came over on the Mayflower sailed under a manifesto that they would all share.  They starved and died off until and when they caved to the cold hard fact that humans will work for their own betterment, and care little about working for others.   So they adopted private property and markets.  The first Thanksgiving party followed a summer of bumper crops.    This is centuries before Marx or Smith. 

pods's picture

But Jeb Bush said he was going to cut my taxes?

And Trump said something that made some chick's hoo-hah bleed.

You mean to tell me that they aren't going to make a positive difference?

pods

VinceFostersGhost's picture

 

 

Here's the deal. Whatever Jeb says.....don't listen to him.

 

Donald......ehh.

greyghost's picture

one just has to laugh....U.S. and china set for recession and oil trying to rally twice this morning

NoDebt's picture

High inventory-to-sales ratio is NOT a problem.  In fact, it's a great opportunity.  Just send that inventory to the recycler and you get ANOTHER boost to GDP.  Once from making the car, another when it's melted down again.

Of course, the auto makers would be losing money by selling those cars for scrap.  So we just have the government step in and pay the difference between sales price and recycle value to make them whole again.

That leaves the government in the hole for the money so we just raise taxes and do a shit-ton of government borrowing.  That borrowning creates a vast batch of new USTs, so the Fed can then launch QE4 and buy then up without fear of running liquidity too thin.  Interest rates fall and economy is further stimulated.  A virtuous cycle is thus established.

Can I cook or can I cook?

- Paul "come worship at the altar of aggregate demand with me" Krugman

pods's picture

I have to admit it that you do whip up a tasty dish.

Did you come up with the "take oil and make fuel to use for planting food to make ethanol to make it back into fuel" too?

pods

NoDebt's picture

No, sadly, I can't take credit for that one.  Whoever came up with that is smarter than I am.

I did come up with a solution to running out of oil storage capacity in Cushing, though.  I started an oil storage company- we store the oil underground by pumping it back down the same wells it was pumped out of in the first place.  Makes all kinds of sense to do this since the infrastructure is already in place.

 

Dr. Engali's picture

Lol... you're on fire today. No seriously dude....your ass,  it's  on fire.

Countrybunkererd's picture

No problem doc.  He can hire halliburton at $18,000 dollars an hour for each employee to put those pesky hole fires out.  They are the best, and sometimes only group that can do it, so cost is irrelevant to market conditions, household budgets and such.  Probably need a team of 100, not for size of the hole fire, but logistics and such.

philipat's picture

So Krugman has been advising kuroda in Japan and his perspective is that The US/Japan/Europe have NOT engaged in enough QE? Even Japan, which now has a Debt/GDP ratio of about 250%. So, Paul, how far should this go? 500%, 1000%, 3000%? And at that point,if nothing improves, would you admit you were wrong? I doubt it frankly.

Actually, Keynes is getting unfair treatment here becuase what he actually said was that Governments should run DEFECITS during down cycles and SURPLUSES during up cycles.'

That is perfectly logical BUT the Politicians forgot the second part, about running SURPLUSES during the UP  part of the business cycle because , well Politicions only know how to SPEND??

philipat's picture

Apologies, Very FAT finger..

halleys5's picture

NoDebt makes a funny point but in reality this is the same scheme the US has been using for years to keep the military sectors ever growing.

Gov't dumps money to private firms to develop new and exciting things that can be destroyed so that more can be produced... wash, rinse, repeat. 

Great for the Beltway Bandits, not so great for the poor saps that this stuff gets used on.

My Days Are Getting Fewer's picture

No different than China - build fake cities and knock them down

 

No different than the USA - build war machines and make them obsolete; build bombs and blow them up

RockyRacoon's picture

They don't have to knock 'em down.  The way they are constructed they fall down all by themselves.  Planned obsolescence you might say, on a short time horizon.

SDShack's picture

Good analysis NoDebt. The only thing you left out is the Printing Press. That little fact, along with defacto control of Bond Markets via the nexus bewteen Govt and Central Banks really changes this from a "virtuous cycle" to a "Perpetual Ponzi".

KnuckleDragger-X's picture

All that pesky Winter weather and this is merely Pre-Winter.......

Groundhog Day's picture

Thier is no resession/depression.  The Fed said so..so it is.  Raise Interest rates we're in a mild recovery....green shoots...transitory...muddle through....jobless recovery....

 

I wonder what the next catch phrase will be?

pods's picture

I'm not sure what the phrase is going to be, but I think a lot of brown people are going to die because of it.

pods

I AM SULLY's picture
I AM SULLY (not verified) pods Sep 10, 2015 9:43 AM

that's http://metaracist.com man ...

Exit through the gift store's picture

I heard it the other day. The new catch phrase is "we are in a Recovery Slowdown" so dont worry this is just a Recovery Slowdown everything is fine.

vollderlerby's picture

if you can't sell it, blow it up

philipat's picture

So WTF would The Fed want to raise interest rates into a Depression? My guess is that EITHER they want, belatedly, to try to "Cover their traces" OR they deliberately want to crash the economy to obfuscate all of the deliberate harm caused over the last three Governors stints? Probably a combination of both.Why on earth does anyone give so much credence to a bunch of unelected, unaccountable, PhD academic who don't live in the real world?and have never been seriously responsible for anything?

But what do you expect when you have a Central Bank whicg is owned by the Wall Street Banks and "Regulated" by the same? Isn't that the very definition of "Moral Hazard"? Or perhaps I am just an old-fashioned idealist?

Soul Glow's picture

The US was mired in recession heading into the Presidential election in '92 and they raised rates to make sure the economy was bad.  They wanted a democrat then, maybe they want a Republican now?

Or they don't raise rates and the dollar hyperinflates.  They're fucked either way.

philipat's picture

Given what should be obvious now to all, do you really think it makes any difference whether the "Reds" or The "Blues" win? It's just a facade of "Democracy" to obfuscate the fascist Deep State?

Countrybunkererd's picture

When it comes to government, at all levels, they are structured so that there is no chain of command.  They operate in a web of command where if the project is a success they all put their names on the list of being part of it.  If the project is a failure no single person can be put to blame over the misery they created.  Pathetic POS people they are.  Universities are the worst for it/best at it and teach the other branches how to do it.

dimwitted economist's picture

Well, i DO Live in Michigan.. but, this is the WORST "Recovery" i've Ever seen..

Tsar Pointless's picture

A recession would be welcome at this point, considering we've been in a full-blown depression since - oh, I don't know - 1929?

Oh regional Indian's picture

Definitely 1933 onwards.

Each major war and USSA's CONTINUOUS wars are all that have stood between dustbowl XXXXXI and this fake, MIC/Finacialization built reality...

Thus this current great war building....

Tsar Pointless's picture

Of all people to respond to my comment, I'm glad to see it's you. I've always been intrigued by your comments, ORI. Please, accept an "up arrow" vote from me.

When I made that comment, I was thinking along the lines of what our "US dollar" has done since 1913. I think you're probably correct with 1933 as the year our long depression began.

http://www.whatamimissinghere.com/archives/26993/value-of-a-federal-rese...

FRN flatline since 1981. Hmm. That year saw a revolution in America. Oh, how glorious it was! Saint Ronnie, we bow to thee!

readyforit's picture

Here we go again.

corporatewhore's picture

Please edit any reference to recession with xxxx and replace with "depression", papered over with EBT and other nonsense.

Countrybunkererd's picture

Steady now.  That type of thinking, especially stating it publicly, might get you a knock on your door.

JustObserving's picture

Yellen raising rates will demonstrate the strength of the freest, fairest economy in this world with only $210 trillion in debt - only over $1,720,000 per taxpayer.

Dr. Engali's picture

The problem is that $210 trill isn't enough debt. I keep telling them that they need to take on moar if they want to fix this pig.

 

I'm Paul the bearded potato Krugman, and I approved this message.

joego1's picture

A.K.A. The Krugthug and his evil kitty.

Groundhog Day's picture

thats it 1.7million per taxpayor

 

"ill gladly pay you tuesday for another loan today"

Countrybunkererd's picture

When they do this, why exactly do we still pay taxes?  What a joke our reality has become.

Dr. Engali's picture

Recovery is just around the corner...., corner...., corner........

I AM SULLY's picture
I AM SULLY (not verified) Dr. Engali Sep 10, 2015 9:27 AM

The "Recovery Summer" is HERE MAN!

https://www.youtube.com/watch?v=VlVmdGiAH2A

SDShack's picture

What is it now, Recovery Summer 6.0 or 7.0? I've lost track.

Ajax_USB_Port_Repair_Service_'s picture

And according to the Farmers' Almanac, it's going to snow again this winter!

Guru1294's picture

I call it a bubble when i see it, and the way i see it this so called recovery has been an even more bigger bubble. bubble in student loans, car loans its sub prime all over again + a whole host of other stuff... doesnt matter what the mainstream media calls it.. a bubble then, a bubble now nothing has changed

Blythes Master's picture

Once agin, proof that the American consumer is double tapped out.

TBT or not TBT's picture

94 million of our working age adults are not even working, and those who are, are aware of that, with variable levels of denial and consciousness of the state we are in.   Many not be tapped out so much as they are bracing themselves for harsher times.   The bright side:  this will be hell on Paul Krugman.