• Advertise
  • Contact Us
  • About Us
  • Supplier Directory
  • SCB YouTube
  • Login
  • Subscribe
  • Logout
  • My Profile
  • LOGISTICS
    • Air Cargo
    • All Logistics
    • Express/Small Shipments
    • Facility Location Planning
    • Freight Forwarding/Customs Brokerage
    • Global Gateways
    • Global Logistics
    • Last Mile Delivery
    • Logistics Outsourcing
    • LTL/Truckload Services
    • Ocean Transportation
    • Rail & Intermodal
    • Reverse Logistics
    • Service Parts Management
    • Transportation & Distribution
  • TECHNOLOGY
    • All Technology
    • Artificial Intelligence
    • Cloud & On-Demand Systems
    • Data Management (Big Data/IoT/Blockchain)
    • ERP & Enterprise Systems
    • Forecasting & Demand Planning
    • Global Trade Management
    • Inventory Planning/ Optimization
    • Product Lifecycle Management
    • Sales & Operations Planning
    • SC Finance & Revenue Management
    • SC Planning & Optimization
    • Sourcing/Procurement/SRM
    • Supply Chain Visibility
    • Transportation Management
  • GENERAL SCM
    • Business Strategy Alignment
    • Education & Professional Development
    • Global Supply Chain Management
    • Global Trade & Economics
    • HR & Labor Management
    • Quality & Metrics
    • Regulation & Compliance
    • SC Security & Risk Mgmt
    • Supply Chains in Crisis
    • Sustainability & Corporate Social Responsibility
  • WAREHOUSING
    • All Warehouse Services
    • Conveyors & Sortation
    • Lift Trucks & AGVs
    • Order Fulfillment
    • Packaging
    • RFID, Barcode, Mobility & Voice
    • Robotics
    • Warehouse Management Systems
  • INDUSTRIES
    • Aerospace & Defense
    • Apparel
    • Automotive
    • Chemicals & Energy
    • Consumer Packaged Goods
    • E-Commerce/Omni-Channel
    • Food & Beverage
    • Healthcare
    • High-Tech/Electronics
    • Industrial Manufacturing
    • Pharmaceutical/Biotech
    • Retail
  • THINK TANK
  • WEBINARS
    • On-Demand Webinars
    • Upcoming Webinars
  • PODCASTS
  • VIDEOS
  • WHITEPAPERS
Home » Bulging Stockpiles Will Weigh on U.S. Growth Throughout 2019

Bulging Stockpiles Will Weigh on U.S. Growth Throughout 2019

Business Inventories
April 17, 2019
Bloomberg

The rising stockpiles of cars, furniture and other goods that helped the U.S. economy boom in 2018 are now poised to cause a hangover this year.

Inventory accumulation added an average 1.2 percentage point to U.S. growth in the third and fourth quarters, government figures show, and were a key to the year’s 3 percent expansion, the fastest since 2005 and President Donald Trump’s annual goal. Reversing that buildup will trim growth in 2019, likely starting in the second quarter and continuing through the rest of the year, according to a Bloomberg News survey of 20 economists last week.

One overhang is the auto market, where the six-month average of dealer stocks of cars and trucks matches the highest since 2009 at 75 days. Manufacturers and sellers of furniture and clothing share the same problem, as do small businesses. The inventory swing is likely to exacerbate the U.S. slowdown, with the economy already facing headwinds from the waning impact of tax cuts, slowing global growth and continuing trade tensions.

“This puts the U.S. economy on a little bit thinner ice and less able to withstand any unexpected shock,” said Diane Swonk, chief economist at accounting firm Grant Thornton LLP in Chicago. “This is one more reason it makes sense for the Federal Reserve to hedge its risks by staying on the sidelines.”

In March, more small-business owners planned to reduce rather than increase inventories in for the first time since December 2017, according to the National Federation of Independent Business’s monthly survey released last week. Yet firms said they were continuing to build up stockpiles for the ninth straight month.

There are two major causes of the inventory overhang. First, manufacturers and retailers bought imported goods in bulk last year in anticipation of tariffs or other barriers, especially from China, with whom Trump’s trade advisers are trying to negotiate a deal. Second, sales have been disappointing for retailers, with declines reported in two of the past three months.

“Firms spent the back half of 2018 trying to get ahead of trade disputes,” said Richard Moody, chief economist at Regions Financial Corp. That led U.S. firms “to step up imports of goods, whether consumer goods or capital goods, and store them in inventory.’’

Exactly how this plays out is uncertain. While trackers such as the Atlanta Fed’s GDPNow estimate that inventories made a positive contribution to first-quarter growth, some economists say the drawdown may have begun then.

In the Bloomberg survey, economists expected a median reduction to growth of 0.2 percentage point in the second quarter and 0.1 percentage point in each of the following two periods. But there’s a wide range of views of when the drags will happen and how large they will be, with some expecting more than 0.5 percentage point of reductions in coming quarters.

“Business inventories is the most difficult component in GDP to predict,” said Russell Price, a senior economist with Ameriprise Financial Inc. who projected a drag on first-quarter growth.

A Federal Reserve report Tuesday showed factory output fell at a 1.1 percent annual rate in the first quarter, the worst performance since late 2017, a further signal of manufacturing softness as producers cope with an inventory buildup.

Ford Motor Co. noted in a conference call this month that truck inventories amounted to 70 days, up from 66 a year earlier, though Mark LaNeve, vice president for U.S. marketing, said that’s not a serious imbalance. “You will almost never hear Ford dealers have too much truck inventory,” he said.

Overall, “most of the buildup now is slowing demand” with declining new-vehicle sales for the industry this year, said David Whiston, a Morningstar Inc. autos analyst.

Other companies have expressed concern. Luggage maker Samsonite International SA aims to cut inventories to a range of 120 to 125 days from 138 days, officials said on a recent conference call. “We’re very focused on that across all of our regions,” Chief Executive Officer Kyle Gendreau said.

Constellation Brands Inc., the owner of Corona and Modelo beer in the U.S., said distributor inventories were recently higher than expected partly because of poor weather, especially on the West Coast. And electronics maker Jabil Inc. has said it built up stockpiles in anticipation of expanded sales and expects inventory levels to moderate.

“Businesses need to slow the gains in inventory adjustment in line with sales,” said Ben Herzon, an economist with IHS Markit’s Macroeconomic Advisers unit. “That business behavior is not going to be adding to growth going forward.”

RELATED CONTENT

RELATED VIDEOS

Inventory Planning/ Optimization Global Supply Chain Management Global Trade & Economics All Warehouse Services Automotive Consumer Packaged Goods E-Commerce/Omni-Channel Food & Beverage Retail
KEYWORDS All Warehouse Services Automotive consumer packaged goods E-Commerce/Omni-Channel Food and Beverage Global Supply Chain Management Global Trade & Economics Inventory Planning/ Optimization North America Retail
  • Related Articles

    Coal Stockpiles Near Record Weigh on Power Prices Across Europe

    Trump’s Tariffs Will Harm Growth in 2019, IMF Predicts

    Experts Weigh In on Wal-Mart's Next-Gen Stores

Bloomberg

Global Oil Trade Shakes Up After Fires at U.S. Fuelmakers

More from this author

Wake up to live
“Supply Chains in Crisis”
updates and the latest Supply Chain News!

Subscribe to our Daily Newsletter

Timely, incisive articles delivered directly to your inbox.

Popular Stories

  • INTERIOR OF A CHICKEN FARM, WITH WHITE CHICKENS AS FAR AS THE EYE CAN SEE

    Worst Avian Flu in U.S. History Is Hitting Poultry

    Food & Beverage
  • TWO FINGERS MANIPULATE WOODEN LETTER BLOCKS TO TURN FROM SHOWING THE WORD RECOVERY TO RESILIENCE

    Five Challenges to Supply Chain Resilience in 2023

    Supply Chain Visibility
  • A PERSON HOLDS UP A TABLET COMPUTER IN A WAREHOUSE, SUPER-IMPOSED BY A GRAPHIC SHOWING A COMPLEX WEB OF SUPPLY CHAIN ELEMENTS

    Three Post-Pandemic Actions for Repairing Global Supply Chains

    Data Management (Big Data/IoT/Blockchain)
  • A MAN IN A SUIT SHAKES HANDS WITH A WOMAN IN A HARD HAT, NEXT TO A STACK OF CONTAINERS

    Three Procurement Technology Evolutions for 2023

    Sourcing/Procurement/SRM
  • The blank stare of a child's eye who is standing behind what appears to be a wooden frame

    The Alarming Continued Rise of Modern Slavery in Supply Chains: How Procurement Can Help Reverse the Trend

    Sourcing/Procurement/SRM

Digital Edition

Scb nov 2022 sm

2022 Supply Chain Innovator of the Year

VIEW THE LATEST ISSUE

Case Studies

  • New Revenue for Cloud-Based TMS that Embeds Orderful’s Modern EDI Platform

  • Convenience Store Client Maximizes Profit and Improves Customer Service

  • A Digitally Native Footwear Brand Finds Rapid Fulfillment

  • Expanding Apparel Brand Scales Seamlessly with E-Commerce Technology

  • How a Global LSP Scaled its Security Program and Won More Business

Visit Our Sponsors

Orderful Yang Ming Alithya
Barcoding Blue Yonder BNSF Logistics
CoEnterprise Data Capture Deposco
E2open GAINSystems Generix
Geodis GEP GreyOrange
Here Honeywell Intelligrated IFM
Infor Inmar Keelvar
Kinaxis Korber Lean Solutions Group 2H
Liberty SBF Locus Robotics Logility
LogistiVIEW Lucas Systems MCA Connect
MPO Nvidia Old Dominion
OpenText ORTEC Overhaul
Parsyl PMMI QIMA
Redwood Logistics Ryder E-commerce by Whiplash Saddle Creek Logistics
Schneider Dedicated Setlog Holding AG Ship4WD
Shipwell Tecsys TGW Systems
Thomson Reuters Tive Trailer Bridge
Vecna Robotics Verity
Verusen
  • More From SCB
    • Featured Content
    • Video Library
    • Think Tank Blog
    • SupplyChainBrain Podcast
    • Whitepapers
    • On-Demand Webinars
    • Upcoming Webinars
  • Digital Offerings
    • Digital Issue
    • Subscribe
    • Manage Your Subscription
    • Newsletters
  • Resources
    • Events Calendar
    • SCB's Great Supply Chain Partners
    • Supplier Directory
    • Case Study Showcase
    • Supply Chain Innovation Awards
    • 100 Great Partners Form
  • SCB Corporate
    • Advertise on SCB.COM
    • About Us
    • Privacy Policy
    • Contact Us
    • Data Sharing Opt-Out

All content copyright ©2023 Keller International Publishing Corp All rights reserved. No reproduction, transmission or display is permitted without the written permissions of Keller International Publishing Corp

Design, CMS, Hosting & Web Development :: ePublishing