Automobile Sales Falling, Inventories Up 7.8%, Interest Rates Rising: What can possibly go wrong?

The census bureau Advance International Trade reports shows the wholesale and retail exports each declined 0.4% from September to October.

Wholesale inventories are down 0.5% year-over-year, but retail inventories are up 3.2% on the strength of a huge jump in automobiles and auto parts.

Advance Wholesale Inventories

Wholesale inventories for October, adjusted for seasonal variations but not for price changes, were estimated at an end-of-month level of $586.9 billion, down 0.4 percent (±0.4 percent)* from September 2016, and were down 0.5 percent (±1.4 percent)* from October 2015. The August 2016 to September 2016 percentage change was revised from up 0.1 percent (±0.2 percent)* to down 0.1 percent (±0.2 percent)*.

Advance Retail Inventories

Retail inventories for October, adjusted for seasonal variations but not for price changes, were estimated at an end-of-month level of $603.3 billion, down 0.4 percent (±0.2 percent) from September 2016, and were up 3.2 percent (±0.5 percent) from October 2015. The August 2016 to September 2016 percentage change was revised from up 0.2 percent (±0.1 percent) to virtually unchanged (±0.2 percent)*.

Inventories

Automotive Picture

• Autos are having a good year, but sales are not expected to beat last year
• Year-over-year, retail inventories are up 3.2%
• Automobiles inventories are up a whopping 7.8%
• Automobiles account for nearly all of the increase in retail trade inventories.
• Excluding autos, retail trade inventories are up only 0.8%.
• Interest rates are rising
• Auto sales are increasingly subprime
• Trade-ins are increasingly underwater

What can possibly go wrong?

Inquiring minds may also wish to consider …

1. October 7: Inventory Crisis: Can Parrots Read Charts?
2. November 18: Inventory to Sales Ratios: What’s Really Going On?

Mike “Mish” Shedlock