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Durable Goods Slightly Better Than Expected On Record Inventory Build Up
The stockpiling continues. While today's durable goods number on the surface was good, declining less than expected at the top-line level, down 0.8%, or $1.5 billion, to $200.3 billion, better than the -1.0% expected, and compared to the -0.1% decline in August. What was better than expected is that durables ex transportation came at 1.7% on expectations of 0.4% (previous adjusted to -0.4%). What however negates all the good data is one simple fact: shipments of manufactured durable goods, declined substantially to $200.1 billion, or 0.7%. So what is the reason for this continuing beat? Why inventories of course: "Inventories of manufactured durable goods in September, up twenty one consecutive months, increased $0.4 billion or 0.1 percent to $365.6 billion. This was at the highest level since the series was first published on a NAICS basis in 1992 and followed a 0.9 percent August increase. Transportation equipment, also up twenty one consecutive months, had the largest increase, $0.5 billion or 0.5 percent to $112.7 billion." Not only that, but the annualized growth rate just hit the highest ever (see chart below)! And as would be expected, the Inventory-to-Shipments ratio increased from 1.81 to 1.83. Said otherwise, we are back to the old model where economic "growth" is only due to stockpiling as producers hope that tomorrow, and tomorrow, and tomorrow someone will actually buy record inventory stockpiles at market value instead of LIFO liquidation prices. Oddly, this reminds us of European thinking too.
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If you stockpile it, it will sell.
Tell that to China. A story you will hear nothing about on the BlowHorn [cnbc]:
http://www.reuters.com/article/2011/10/26/us-ironore-idUSTRE79P1BB20111026
Hence that 'strange' sell off in the AUD. The safe currency. Harbinger of things to come.
http://www.steelorbis.com/steel-prices/orbis-steel-index/
-Uncle Knukie, way back in the olden days when fundamentals mattered is this what woulda led to the classic inventory recesssion if people quit spending at all?
-That's right little Dingleberry. You should be Secretary of the Treasury some day.
-But Uncle Knuk, I thought you loved me.....
In laymen terms, could someone educate me as to why increased "inventories" are bad? Don't they eventually sell the widgets? Or is the inference in the "hope", and the result is they are stuck with widgets they never sell?
My boss always taught us to put it on a truck, go for a ride and count it as sold.
Bring it back and count it as returned goods.
"My boss always taught us to put it on a truck, go for a ride and count it as sold. Bring it back and count it as returned goods."
There's an inappropriate joke about women in there somewhere - sorry ladies...
More like.. The truck full of goods was stolen...
If inventories were actually being reduced, they would be reduced.
Don't worry, they will get reduced as more items start "falling off the truck".
And your point is? I mean we have the bailouts already. Might as well have the shit that goes with it too.
The point is, the more things change the more they stay the same and none of this is really relevant. Everyone with a brain or inside knowledge knows that this is all about energy and resources, always has been. With Libya now secure, the western world can continue "restoring peace and democracy" to the african continent (and get all those resources on to the open markets ASAP). Don't kid yourself China and Russia are on board with this plan. Brazil could care less, they have their own continent to finish exploiting.
If you really are a disabledvet, you already know this has always been the plan. Myself - ARMY-AMEDD. Thought I wanted to be a doctor at one point, but I found a more productive outet in Agriculture and Biotech. However, if I was going to become a doctor I highly recommend the ARMY route. I mean, why become a doctor in a socialized system and take on a massive debt load that you can not default on. This isn't simply about debt slaves, this is about having the most highly intelligent/mindless debt slaves in the universe.
Still counts as "sold", lol, prolly in the nearest flea market.
Try plotting inventories as a % of GDP. You're seeing nothing more than appropriate inventory management over a long term chart.
http://nomoneynoworries.wordpress.com/2010/03/page/3/
Sure Notheaster, everything has to sell! Make 50 billion IPhones, stick em all in warehouses, sooner or later it all has to sell everything sells, full price at that!
whatever happened to Just In Time business model? you know, the one where you keep 6 widgets in the warehouse because those 6 widgets are sold and ready to be shipped? funny how the JIT model has fallen by the wayside with no comment from the media about it.
The end of stock piling is around the corner
HORIZON LINES TO DISCONTINUE TRANS-PACIFIC FSX SERVICE Company Will Conduct Orderly Transition to Minimize Supply Chain Disruptions Last Voyage of FSX Service from China Expected on November 2;Final Sailings to Guam on November 8 and 10 CHARLOTTE, NC (October 24, 2011) – Horizon Lines, Inc. (OTCQB: HRZL), the nation's leading domestic ocean shipping company, today announced it will discontinue its Five Star Express (FSX) trans-Pacific container shipping service between the U.S. West Coast, Guam and China. Horizon is implementing an orderly transition plan, beginning October 31, 2011, and will work aggressively to mitigate any supply chain disruptions for its customers. Discontinuation of the FSX Guam and China services will have no impact on the company’s domestic ocean services in Alaska, Hawaii, or Puerto Rico. “This has been a very difficult decision in light of the tremendous contributions from our associates, and our organized labor and vendor partners, who have worked so hard to make the FSX service a success,” said Stephen H. Fraser, President and Chief Executive Officer. “Our decision to exit this highly volatile market will allow Horizon to focus on our core domestic ocean shipping services, and provide the opportunity to produce a more profitable and stable financial performance over time.” The last voyage of the FSX service from China is scheduled to depart Shanghai on November 2, 2011. Horizon Lines also will suspend ocean services to Guam and surrounding islands effective with the last sailing from the U.S. West Coast on November 10, 2011. The company expects to cease all operations related to the FSX service during the fourth quarter and does not expect to have significant continuing involvement in the operations after the termination. Therefore, the company will classify the FSX service as discontinued operations and as a result, expects to record a pretax restructuring charge of between $105 million and $110 million in fiscal fourth quarter 2011. The charge includes estimated costs to return excess rolling stock equipment, facility closures, severance, and vessel charter expense, net of estimated sub-charter income. Losses associated with the FSX service produced a negative adjusted EBITDA impact of approximately $43.7 million for the nine months ended September 25, 2011, with additional losses expected through the end of the year. Following their last voyages, the five Hunter-Class D-8 vessels operating in the FSX service are currently planned to be laid up, after dry-docking of the remaining four vessels. The vessels are leased from Ship Finance International Limited through 2018 to 2019. Horizon Lines is exploring sub-chartering the vessels and other solutions to partially mitigate ongoing charter expense and maintenance costs. Horizon Lines launched the FSX service in December 2010, following expiration of a long-term space charter agreement with Maersk Line. The FSX service offers rapid eastbound transit between Ningbo and Shanghai in China and Los Angeles and Oakland on the U.S. West Coast. The westbound leg of the FSX service provides transit between the U.S. West Coast, Guam, Micronesia and the Northern Mariana Islands. Since early in the year, the FSX service met volume and vessel utilization expectations, winning cargo from customers attracted to the schedule reliability, rapid ocean transit and seamless intermodal rail links to inland U.S. cities. However, the Shanghai Container Freight Index cites eastbound freight rates from China to the United States have fallen more than 37% in the past 12 months, from $2,400 per 40-foot container in October 2010 to approximately $1,500 in October of this year, the lowest level since the worldwide recession of 2008-2009. At the same time, the average price of bunker fuel has climbed more than 40% since the launch of the service. “We do not expect any measurable improvements in fuel prices, the freight-rate environment or in this tradelane for the foreseeable future,” said Brian Taylor, Executive Vice President and Chief Operating Officer. “Growing capacity continues to outpace demand and the forecast for 2012 calls for more of the same.” In Guam, the expected growth in cargo driven by infrastructure improvements associated with the military redeployment from Okinawa has been further delayed due to the budget crises in Japan and the U.S., as well as revised Japanese priorities in the wake of the earthquake and tsunami earlier this year. This has made the Guam trade no longer financially viable for Horizon Lines, without an eastbound return voyage from China. “Given current market conditions and foreseeable future expectations, discontinuing the FSX service is the appropriate decision for the company,” said Mr. Taylor. “It will allow us to focus all of our resources on serving customers in the very solid domestic ocean markets in Alaska, Hawaii and Puerto Rico.” China trade is on the downward spiral--
They aren't that big, we did minimal Horizon volume at our yard.
HRZ was having some liquidity issues of late...think they missed a few interest payments, or were about to.
http://www.joc.com/container-lines/horizon-lines-misses-aug-15-interst-payment
Allow Me to Translate:
The corporate owned US Empire, for which the US military is the enforcer... has just announced it is retreating from Guam and cutting the imperial frontiers back from the Chinese sphere of influence in a rear guard action...
Corporate CEO announcements matter...
Hillary announcements? Simply imperial buffoonery...
currencies did not even moved.... yaks, some1 pump the USD/JPY up....
40 percent off if you buy a whole warehouse of maytag washers and dryers.
Bye 10 lbs of copper wire get a free ton of slag copper and an inhome refining kit.
Are your capital needs being met on this excellent plan fine sir?
Copper yes...
Maytag washers... not so much... Unless there is a lot of copper scarp in them...
The world is stockpiling for that big customer from Mars. Fucking pods. Still trying trying to get that infinite growth model to work for them.
We have rockets too! Distribution is not a problem Mr.Martian.
Unfortunately they don't get along with hilary clinton on account of they use the same tactics.
http://www.youtube.com/watch?v=kGo1-EVrsx8&feature=related
Algos don't care about inventories, apparently.
Somewhere I can only assume there are tankers full of "new coke" circa 1985 waiting for demand to return... ah, refreshing!
That gets written off the following years as gone bad
I guess I should have laid down the sarcasm a little thicker...
Stick the inventory build-up on Feebay for $0.01 and IT WILL SELL, GUARANTEED.
Whether it makes a profit or not is another matter... but who cares about profits with the current rampant accounting fraud going on?
And here is the freaking idiot telling all to buy AMZN. Do I have to say his name. Do I have to say his same . Hey hey.
Love my Bruce Springsteen. lol
13.47 It’s all kicking off in Rome. At least two deputies from the Northern League, a member of the ruling centre-right coalition, had a fist-fight with members from the opposition FLI party of speaker Gianfranco Fini, Reuters reports. Two deputies grabbed each other by the throat as other parliamentarians rushed to separate them, while parliament was temporarily suspended.
The trouble out because of sarcastic remarks on television by Fini alleging that the wife of League leader Umberto Bossi had retired at 39. Bossi has steadfastly refused to make more than slight concessions on changing Italy’s generous pension system as part of reforms demanded by European leaders
http://blogs.ft.com/the-world/2011/10/eurozone-crisis-live-blog-6/#axzz1bt7mCsvH
When are Parliamentary Fist Fights Coming to Amerika?
I can't wait for Stretch Face Pelosi taking on Wild Eyed Bachmann, mano-a-mano...
Oh wait Wimp Fuck Eric Cantor against Boston Barney Frank... Talk about a pink pillow fight...
Stores are overflowing with GeeGaws, DooDads and shiny junk....nobody is buying.....credit is dried up so people can no longer buy the stuff they don't need and cannot afford on credit they should not have been given.
There!
Theory: increased inventories are partly due to expectations of future inflation being higher (or much higher) than today, thus companies are willing to spend dollars to have goods on hand when prices increase.
Certainly part of it. You will be much more profitable when any demand returns if you already have the items built at the old margin cost.
But then again, this is another reason why deflation scares the crap out of so many "traditional" economic and business leaders.
God forbid that some competition come along inthe future and deliver the same product for less. Fucking crony capitalistic bullshit.
Fascism.
In manufacturing that I know, its cheaper to keep running than shut the plant down for awhile
but that will happen very shortly when there is no more room for product
Sure...especially when they can finance that inventory at close to 0%..
Liesman will celebrate with an extra Shoney's dessert bar visit today
And Consumer Metrics has gone for an implied moonshot demand 'recovery' to follow in a few months:
http://www.consumerindexes.com/history.html
I noticed this when the moonshot began to happen, right as the economy began to really hit the stink button again.
Somehow, the Consumer Metrics Index was compromised.
No way that reflects reality. Certainly not the reality not portrayed in the popular media.
Oh, and ain't "supply-side economics" just the bee's knees? If you build it, they will come...and buy it.
We live in a fake empire.
www.youtube.com/watch?v=KehwyWmXr3UAh, yeah, I have been watching those CMI graphs closely for a long time now ... yep, this moonshot started the moment QE2 ended. I even detected some test runs to check the volumes needed, before they turned the online spigot to full-retard. It also started at the same time that CMI themselves were very directly calling into question the BEA stat data revisions, that they were forced to constantly re-evaluate, and how it was not even possible to make meaningful and helpful rational assessments anymore with BEA data that's constantly wildly revised back several years - figures they thought should have been close to being nailed-down. But changed dramatically from quarter to quarter.
And they pissed all over the unreasonablely optimistic inflater number, as usual, and how it painted a far to rosey picture of US growth.
This is nothing but govt pumping money to companies, who have nothing much to do but 'look busy' and fill warehouses to the rafters.
Full retard.
I came to the tentative conclusion they're doing the same to online sales stats via govt puchases that are goosing the stats and demand:
Thats OK..the government, will just buy the goods in inventory and destroy them..problem solved!
Can we use a B-2??? ... huh ... can we?
Inventories? Who cares? we'll be back to barter trade anyway next year, then they can the junk they have in their warehouses for other junk. more junk you have, more you can trade. smart people who own the warehouses.
No kidding, possesion is already 9 tenths of the law. Soon it will be all that matters. Got physical?
OK, so I guess your point is that a lot of the strength in non-defense capital goods orders is going to come at the expense of future months?
Tyler, I'm wondering if you (or anyone else for that matter) has any stats on the success rate of previous "pre-emptive stockpiling" periods. In other words, how good are US businesses in gauging demand...when they make the decision to build up inventory they're clearly doing so because they anticipate future demand to go up, so what's their track record? Do US companies generaly get it right when they pro-actively increase production due to a confident expectation of increased demand, or does it usually mean we're gonna have a lot of unsold goods sitting on the shelves? I tend to think US corporations are pretty good, over the long term, at guaging what their customers want, and they produce accordingly. Do you have any stats that show whether previous build-ups like this led to success or major problems? Thanks.
My guess is that the answer to your question would depend highly on the political environment and whether or not these same companies successfully lobby congress into buying their inventories at inflated prices. Google $500 toilet seats, and $1000 screwdrivers.
In order words, my guess is that this only works during time of great military expansion.
We really are at a point where simple dropping fiat from helicopters might actually be more effective.
Need to have high inventories when you have a war in the works.
These durable-goods manufacturers are taking advantage of lower copper prices to build up inventory-- refrigerators, freezers, air conditioners, they all are chock-full of copper. But will their bet for eager customers over the next year pay off??? Hmm, I guess if you listen to dopey "economists" about "recovery winter", you can end up burned.....
Wouldn't it be better for them to buy futures contracts in copper now than to go and build inventory (which may or may not be bought)? Sort of like what the airlines do with oil futures to hedge spikes in their fuel costs.
I would think a company would buy a copper contract now that it is "cheap" relatively speaking. If the price goes up for copper, then, then they just hedged their input costs risk (and inflation risk). If the copper price stays stable, then, no harm and gains by not having excess inventory which would have to be liquidated at lower prices.
I think that these manufacturers are buying intermediate goods (wires, pipes, etc.) made out of metals, from subcontractors, as opposed to the metals themselves. The intermediate goods today are made on just-in-time principles, so when the price of the inputs go down, the prices of the products go down, and the mfgs. might be building now to avoid higher costs later. Copper tubing (at least retail) is pretty pricey, so if you can shave 10% on your unit build costs over time by making things now, some mfg. might be willing to take the risk. Just a theory.
https://coppertubingsales.com/storefront/index.php?cPath=21_117&osCsid=nntpikknl8qise95r0n7kij6i3
"Unfilled orders for manufactured durable goods in
September, up seventeen of the last eighteen months,
increased $6.9 billion or 0.8 percent to $885.3 billion."
so shipments declined 1.4 billion, but unfilled orders rose 6.9 billion
reminds me how apple reports sell-through decline of 2.4 million iphones, but everyone forgot that the weekend before they reported that miss, they sold 4 million new ones
or better yet, apple used to suck because they weren't able to make them fast enough
even better yet, what screw-ball company would make their customers camp out all night in order to ensure product availability.
just-in-time inventories might be shifting if orders keep going unfilled.
1. Look at this t.e.n. year old graph with the same conclusion (h/t Psar) http://tinyurl.com/5rpnhrj
2. Get some tissues
3. Start crying
Could it just be a build up of perceived demand for the recurring event,,,,CHRISTMAS????
Only if people are planning on also buying things like iron ore and copper for X-mas too. The build up is across many sectors. Maybe in the icrap sector your statement holds, but what about the rest of the economy?
You are right, I was attempting to reference the build up in manufactured goods. I don't believe people will be happy with the actual processing and usage of said goods when January gets here. I could be wrong, as most people will spend like drunken sailors for Chistmas, even when broke. Maybe that is what businesses are hoping for as well.
Inventories are NOT inflation adjusted so that is a important fucking footnote. It is only useful to look at Inventory/Shipment and Inventory/New Order ratios if you want to get a sense of where we stand historically. We are still well below 2009 levels.
Just wanted to make that point clear. I have no opinion on what the data is telling us.
Well they need to build the inventory of durable goods cause when consumer confidence is in the toilet, what everyone does to cheer themselves up is to go shopping.
Can't wait for the 3Q GDP report tomorrow. Bloomberg is reporting the consensus estimate at 2.5%. If its anywhere near this number I'd be shocked.
Meantime, stock up on your PHYSICAL gold and silver - http://gainesvillecoins.com
Gotta fatten up the turkey for Thanksgiving! Stuff, stuff, stuff.
you invasion-denying Bushbot over-consumptionists are not doing your “patriotic duty” …..sale on cheap chinese plastic crap on aisle #5……that is all.
(don’t you just hate the globally discredited supply-side Chicago school economic “theory”? … sorry libertarian Friedman-iacs)
Is this chart time adjusted for price inflation?