GM and Chrysler and a bunch of component makers filed for bankruptcy. This is not exactly a growth industry.īut this year, inventories collapsed due to the semiconductor shortage that has triggered rotating shutdowns of assembly plants in the US and around the globe, while strong demand in March and April depleted inventories.įor the three months of May, June, and July, inventories at auto dealers were stuck at around $153 billion, a level first seen in 2004, when vehicles were a lot cheaper than today – for example, according to the WOLF STREET “F-150 & Camry Price Index,” the MSRP of the F-150 XLT was $22,000 in 2004 and $35,000 in 2021.ĭuring the months following the Lehman bankruptcy, new vehicle sales collapsed, and the country was suddenly awash in inventory that suddenly couldn’t be sold. In terms of the number of vehicles, not dollars, retail sales and inventories have bounced around in the same range for 25 years. Inventories at new and used vehicle dealers and parts stores normally account for over one-third of total retail inventories.
But these dollar-inventories have been inflated by higher product costs due to rampant inflation up the supply chains, including used-vehicle wholesale prices that soared by 24% year-over-year in July and nearly 40% from two years ago, and by a shift to higher-end vehicles among new car dealers. In dollar terms, overall inventories ended July at $603 billion, unchanged since April, and down 9.3% from two years ago. The overall inventory-sales ratio of 1.1 in July means roughly 33 days’ supply, when 40 to 45 days’ supply was normal before the pandemic. The second spike occurred in March and April 2020 when retail sales collapsed during the lockdowns.Ī ratio of 1 says that the retailer has enough goods in inventory for one month of sales at the current rate of sales – in other words, 30 days’ supply. The 2008 spike occurred when retail sales suddenly plunged as auto sales collapsed after the Lehman bankruptcy. In July, according to the Commerce Department on Thursday, the inventory-sales ratio ticked up a tiny bit, as a result of a small decline in retail sales in July from the free-money blow-off spike, but remained near the lowest levels in the data. In May this year, it hit an all-time low in the data going back to 1992. The inventory-sales ratio (inventories divided by sales, a standard metric of supply, which cancels out the impact of inflation) started collapsing last year. In the months since then, retail sales have tapered off a wee bit but remained close to the tippy-top of this free-money blow-off spike. Stimulus-fueled retail sales started spiking last year, culminating in a mind-blowing free-money blow-off top in April.
And overall and supply has remained at record lows for four months in a row. But they’re facing all kinds of shortages, supply snags, transportation chaos, and surging prices. Retailers are trying to stock up for the holiday selling season. Stimulus-fueled blow-off demand spike meets messed-up supply and transportation chaos.
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