Inventory / Sales Ratio Spikes

Forbes details the latest Inventory / Retails Sales figures:

The Good:

Business inventories fell 0.7% in November, a bit more than the consensus 0.5% decline and the largest drop since November 2001. IFR was expecting a 0.8% drop.

Inventories were down in all major sectors but fell 1.3% among retailers, the biggest drop since July 2005. Auto dealer inventories fell 1.7%, so total retail inventories excluding auto dealers fell 1.0%, lower than the overall retail inventory drop but still a record.

The Bad:

November business sales fell a record 5.1%, and are down 8.9% from November 2007. The prior record was October's 3.9% decline.

What it Means:

As sales are falling faster than inventories, the current level of inventory on hand is increasing relative to sales. In fact this measure increased almost 17.5% from a year ago. This means there is less need for a businesses to reorder (there is already plenty in their inventory), which means new orders, although already awful, are likely to get worse going forward.



Source: Census