Wholesale Trade "Gap" Reaches Record High As Sales Tumble, Inventories Rise

Tyler Durden's picture

Worst.Case.Scenario. In 24 years, the ratio of wholesale inventories to sales has only been higher than the current 1.35x once - at the peak of the recession in the last financial crisis. Wholesale sales tumbled 1.3% MoM (worse than the -0.3% exp) and inventories rose 0.3% MoM while expectations were for a drop of 0.1% (inventories over sales difference rose from $143.6BN to $151.2BN in one month, a new record high.) And finally, automotive inventories rose to 1.78x sales - the highest since the crisis.

Keep stacking, despite tumbling sales...


Which leaves us firmly in the "recession imminent" section of the business cycle...


And there has never been a wider absolute spread between inventories and sales...


And as far as the automotive sector - that bubble may have a problem...


This cannot end well.

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Shadow1275's picture

Sales? We don't need sales, we have QE


We now return you to your regularly scheduled peddled fiction courtesy of your "Democratic" government

Temporalist's picture

Rates will normalize any day now.

Buckaroo Banzai's picture

The technical term for that is Real Soon Now.

tarsubil's picture

Love the automotive numbers. That is with 84 month loans. Folks, when that credit cycle turns over, that is going to be a real bitch. We'll only have to wait 7 years for those broke poor bastards to pay that stupid loan off on a $50K pickup used to commute to an IT job.

sharonsj's picture

How about this: I'm 72 and I just got a six year auto loan.  Is that optomism or what?

Budnacho's picture

....and what does Gartman say?

BandGap's picture

Gartman says turn this shit upside down, bitches!

Thinking about all those sales coming up.

My wife and I shop at Sam's Club (please, we have six kids) and last weekend the check-out lady said she had never seen so many things discounted in such a short time.Not so much in food but electronics has dropped very fast. LED lighting is actually becoming competative.



Element's picture

You'll soon be able to get two Gartman's for the price of one.


Dr. Engali's picture

What we need is on big global boating accident so we can start stacking again. See.., problem.., solution. That's what I do. Job creation in action.

TheSecondLaw's picture

When this blows, central banks will blame governments, governments will blame central banks, politicians will blame the banks, the banks will blame the politicans...and then all of them will come together and screw the people.

Need to change the preamble to the constitution:  "We the people of the United States...are screwed." 

FreeShitter's picture

That scenario was planned over 100 years ago....peddle on that motherfuckers.

eforce's picture

According to The Protocols it's been going on for more than 23 centuries.

PerkyPooper's picture

what is the inventory level on screws? have we got enough?

Mr. Bones's picture

Firesales soon? Or just fires?



CJgipper's picture

Just fires.  They'll never allow us plebes to buy at reduced market prices.


Remember, Keynsian economics is all about creating "demand" and inflation.  So if they sell at the reduced prices, that's a "catastrophe" because demand will fall along with prices. "DEPRESSION!!!!!"  Not really, but that's what they say anyway.

LoveTruth's picture

What is good to buy before recession?


PerkyPooper's picture







trump bobble head

Hohum's picture

Can the Federal Reserve sop up the excess inventory?

PlayMoney's picture

sure, they buy all the excess new cars....buy a fancy new car crusher from bond sales....put it out back of the Eccles building.....sell the scrap to save the economy.....problem solved. Hey i just realized im thinking like a central banker :) 2nd career potential???

PerkyPooper's picture

My TSLA short is working great. My borrow costs are offsetting my losing position

PerkyPooper's picture

it's ok, the car dealers will decalre self-help and offer consumers "employee pricing", then all excess will be bought up

AbbeBrel's picture

Maybe Bernspankellen will start buying Motor Backed Securities, while resisting calls to tighten Regulatorations, such that the secondary market must actually be breathing in order to bid on the MtrBS.

As for recession forecasts: "I don't buy your premise", Bernspankellen was quoted, "it is pretty unlikely premise that any Central Bank can make mistakes".

PerkyPooper's picture

it's gonna be ok

amazon drones can pick up and deliver cars directly to your door.

with a built in uber driver, so you can read ZH while you ride around on $0.50 RBOB

yogibear's picture

Oil glut growing.

Deutsche Bank: Chinese Oil Demand Growth to Be Halved by 2020

According to Deutsche Bank, demand for oil is going to come to a screeching halt by 2020. The reasons weren’t articulated very well. I can only surmise they mean fuel efficiency will vastly improve and that the Chinese people will opt ride bicycles to work, rather than automobiles.

Either way, if Chinese demand for oil drops by half, this will be a disaster of the first magnitude for the House of Saud and similar houses of their ilk.

ImmodestExtant's picture

This makes sense. The Chinese gov't will ban cars, citing "smog" and some nebulous claim for "public health" as the reason, and force their serfs to buy electric bikes (but with steel chassis, to stimulate demand). A few years later, they will discover zero emission cars, which in other parts of the world have existed for more than 200 years, but will be miraculously new and better, because they are now Chinese, and which will then become the new rage. Thereupon serfs will leave their bikes lying around in a ditch, the only sign of the previous bike boom being their lithium batteries spontaneously and silently combusting every now and then, filling the now smog-free horizon with a warming red glow.

Iam_Silverman's picture

But, looking at the first chart indicates that we are heading into a more stable plateau near zero.  This would be fine if most wholesale inventories to sales were using just-in-time metrics.  Wholesale inventory change is approaching zero from positive territory, and the change in wholesale sales is improving (becoming less negative, or rising).  Isn't that what you'd want - sales and inventory approaching a zero change state?  In an expanding economy, you'd see inventories going negative as sales went positive (they'd cross the zero line) until factory output or lead-time financing allows the wholesale inventory to build and become stable in relation to sales.


I guess that I just don't "get it".

herkomilchen's picture

Excess inventory at all is a sign of overproduction vs. sales.  You're right this bad thing is worsening less quickly, but its still worsening, and worse is worse.

Iam_Silverman's picture

"Excess inventory at all is a sign of overproduction vs. sales"

I can see this in the realm of just-in-time stocking, but what about seasonal products?  The fashion industry is always building and buying product for distribution 3 to 6 months in the future.


Then, there's that nasty meme about production being down as evidenced by the ISM numbers.

I'm glad that I decided not to become an economist at a very early age.

assistedliving's picture

1st chart shows Inventories falling and Sales rising

3rd chart shows Inv flat-lining and Sales falling

I hate charts.

ImmodestExtant's picture

Another wonderful product of modern education...

vote_libertarian_party's picture

How much inventory is there for 'apps'?

ChargingHandle's picture

The auto sector is doomed. Extremely long terms, high percentage of leases, and a notable uptick and subprime loans spells certain pain.