This article was originally published by Michael Snyder at The Economic Collapse
When economic conditions initially begin to slow down, businesses continue to order goods like they normally would but those goods don’t sell as quickly as they previously did. As a result, inventory levels begin to rise, and that is precisely what is happening right now. In fact, the U.S. inventory to sales ratio has risen sharply for five months in a row. This is mirroring the pattern that we witnessed just prior to the financial crisis of 2008, and it is exactly what we would expect to see if a new recession was now beginning. In recent weeks, I have been sharing number after number that indicates that a serious economic slowdown is upon us, and many believe that what is coming will eventually be even worse than what we experienced in 2008.
And even though I write about this stuff every day, I was stunned by how rapidly inventory levels have been rising recently. The following numbers come from Peter Schiff’s website…
This comes on the heels of the largest gain in wholesale inventories in more than five years in December.
Inventories rose 7.7% from a year ago in January. Meanwhile, sales only rose by 2.7%. Overall, total inventories were $669.9 billion at the end of January, up 1.2% from the revised December level.
The increase in durable goods inventories at the wholesale level was even starker. These inventories were up 11.7% from January a year ago, and are up 17% from January two years ago, hitting $415 billion, the highest ever.
Businesses don’t like to have excess inventory, because carrying excess inventory is expensive and cuts into profits. So they try very hard to manage their inventories efficiently, but if the economy slows down unexpectedly that can catch them off guard…
There are few indications of economic slowing that are more convincing than an unwanted build in inventories — and that apparently is what’s underway in the wholesale sector.
When inventory levels get too high, businesses often start reducing the amount of stuff they are ordering from manufacturers.
So we would expect the numbers to indicate that manufacturing output is down, and that is precisely what we have witnessed over the last couple of months…
U.S. manufacturing output fell for a second straight month in February and factory activity in New York state hit nearly a two-year low this month, offering further evidence of a sharp slowdown in economic growth early in the first quarter.
If manufacturers are making and sending less stuff to businesses, and if businesses are selling less stuff to their customers, then we would expect to see less stuff moved around the U.S. by truck, rail and air.
And wouldn’t you know it, the numbers also tell us that this has been happening too. The following comes from Wolf Richter…
Now it’s the third month in a row, and the red flag is getting more visible and a little harder to ignore about the goods-based economy: Freight shipment volume in the US across all modes of transportation – truck, rail, air, and barge – in February fell 2.1% from February a year ago, according to the Cass Freight Index, released today. The three months in a row of year-over-year declines are the first such declines since the transportation recession of 2015 and 2016.
So there you have it. Anyone that tries to tell you that the U.S. economy is “booming” is simply not being accurate.
And when you throw in the fact that we just witnessed one of the worst disasters for U.S. agriculture in all of U.S. history, it is easy to understand why the economic outlook for the remainder of 2019 is rather bleak. One agribusiness company just announced that it will have “a negative pretax operating profit impact of $50 million to $60 million for the first quarter” as a result of all the flooding…
Already suffering from low crop prices and the U.S.-China trade war, Mother Nature has delivered yet another blow to the beleaguered American farmer. Growers in the heartland this year have seen arctic cold blasts, been blanketed by snow and just in the last week were inundated by floods. Archer-Daniels-Midland Co., one of the world’s biggest agribusinesses, said Monday that it expects weather disruptions to have a negative pretax operating profit impact of $50 million to $60 million for the first quarter.
Korth said he fears the worst for local farmers, citing a friend who lost 85 cows to flooding and another who sells seeds and has already seen order cancellations.
“It’s going to put a lot of people out of business,” Korth said. “It’s just a terrible deal.”
Unfortunately, the flooding in the middle portion of the country is just getting started. According to the National Weather Service, we are going to see more catastrophic flooding for the next two months.
As you can see, the elements for a “perfect storm” are definitely coming together, and I encourage everyone to get prepared for rough times ahead.
But many people are not that concerned about a new crisis, because they remember that global central banks were able to pull us out of the fire last time around.
Unfortunately, they may not be able to do it this time. Just consider the words of the deputy director of the IMF…
Major financial institutions may be powerless to prevent the next global economic downturn from tuning into a full-blow recession, the International Monetary Fund has warned.
In a speech on the future of the eurozone, the IMF’s deputy director David Lipton, warned of the depleted power of central banks and governments to combat another sharp economic shock.
“The bottom line is this: the tools used to confront the global financial crisis may not be available or may not be as potent next time” he said.
But I am sure that global central banks will try to patch the system back together again, and at certain moments it may even look like they are having some success.
In the end, however, they will not be able to stop the “Bubble To End All Bubbles” from completely bursting.
It has taken decades of exceedingly foolish decisions to get us to this point, and there is simply no way that we can avoid the day of reckoning that is coming.
Michael T. Snyder is a graduate of the University of Florida law school and he worked as an attorney in the heart of Washington D.C. for a number of years.
Today, Michael is best known for his work as the publisher of The Economic Collapse Blog and The American Dream.
If you want to know what is coming and what you can do to prepare, read his latest book [amazon text=Get Prepared Now!: Why A Great Crisis Is Coming & How You Can Survive It&asin=150522599X].
In other news, stage 2 of the spring garden goes in this weekend.
Good ammo sales at AIM too.
Got my first items in the new raised beds.
Next comes a new strawberry bed, after this week’s possible frost.
Then sweet potatoes.
Mine will be limited this yr. Back surgery next month. Hope to have everything I want in before that so I can recover before any harvesting.
Life is still good in my back yard.
Prep your souls. 2020 will be brutal.
Poor Pity all that unsold China garbage sitting in warehouses. Here is what to do,.. Declare it all defective, Send it all back to China in the same shipping containers they also left here, and get a full refund. Problem solved.
What this is called is a “Manufactured Crisis” haha Over supply, so suck it up buttercups and start having sales till the price is fair to buy it.
“Prep your souls. 2020 will be brutal.”
Not sure about what year, but it WILL be worse than brutal.
Still to cold here to plant but should be able to set up next week. First year doing raised beds and a garden tower so looking forward to some fresh veggies.
just went out to inspect my garden with potatoes, beans, and peas growing
This comment section sucks. You cannot comment in real time.
Earth to Mr. Deputy Director of the IMF: I don’t give a rat’s patootie about your problems. Maybe you don’t have the tools to fight the upcoming global crisis but we the great unwashed in flyover country ALREADY in have the tools we need.
Business is slow maybe because it’s still winter/cold up North?
On another note, with the floods in the Midwest, expect the price of gasoline to go up, after all it’s 10% ethanol made from corn.
For over ten years now I have been reading predictions of:
✓ Economic Apocalypse
✓ Stock Market Collapse
✓ Flu Pandemic
✓ EMP Attack
✓ Nuclear War with China
✓ Nuclear War with Russia
✓ Massive Solar Flare
It’s not that I don’t think that these things can’t happen or won’t happen (which is why I am very much involved in preparedness), but I have read too many warnings of imminent disaster to believe that they are just around the corner. There have been too many cries of “Wolf,” and these cries diminish the impact of the next prediction of doom.
Don’t let the wolf deter you.
Syria and Venezuela are prime examples of how bad it can be and how long it lasts. Bosnia before that.
Bet they never thought it would happen ten yrs ago.
You forgot CW2 which I personally believe is happening now.
I agree that there is a certain level of crying wolf.
I think most of us here have developed a filter.
For example I ignore anything advocating precious metals.
They are useless where I live.
But I pay a lot of attention to any information on survival
in the event of massive social/civil infrastructure failure.
I ignore NBC stuff, since my location is very unlikely to be exposed to NBC attack, but pay attention to First aid and Layperson medical treatments.
Keep on prepping!
It’s always good to have something tucked away for rainy days, but I too have seen people like Michael, Alex ‘psyop’ Jones and a host of others going on and on about the imminent collapse of such and such for a long time. Even a broken clock is right twice a day.
People like Michael give these NWO morons too much credit. They don’t control the universe. You can’t prepare for everything. Get right with the Almighty and pray you’re lead out of whatever karma has in store for this nation and the world.
Lowering the price of goods never comes to mind. Go ahead and price it all out of reach. Maybe the people will object with some planned action, I won’t hold my breath. How can the near worthless dollar be deflated further? The US motto should be “get it while you can by hook or by crook.”
so when you have overstock you put it on sale! You don’t leave it in the warehouse to rot and get dusty. Supply and Demand guys. You’ll see sales all over the place. Sales are slow after Christmas and pick up after Easter…happens every year…food or otherwise.
I cant buy new crap until I repair the older crap that fell apart. I dont want anymore cheap crap. Geez.
The stuff piling up in warehouses before the depression were American goods, putting American workers in danger of losing their work.
The Stuff piling up now are Chinese and other foreign goods, putting Chinese and other foreign workers in danger of losing their work.
People don’t have much extra money. Most don’t want to waste it on expensive junk that falls apart at first use.
Exactly its imported crap. and imported before Trumps Tariffs. So what If Folks in the USA don’t buy it? So What if some imported goes Broke? So What If we cant export grain. If the grain prices falldue to oversupply. Bread and cerial products get cheeper. grain fed amimal products get cheeper. stull like eggs & milk. meat ect get lower priced because cost of production fall. Grain Farmers just have to cut production cost. Use less expensive fertilizer. only grow amounts that you can sell on contract. Most grain farms are in trouble due to overproduction. The Midwest floods will curb that overproduction for this season.
The best time to purchase holiday decorations is just before the holiday, right after. Things like paper plates and napkins with winter designs or spring flowers can be used throughout the entire season but sometimes it’s nice to have decorations that are specifically for the occasion. Sure, these things are trivial but when shtf they give people a sense of normalcy.
yep. Time to buy those winter coats and boots. usually 50%off, sometime 75%
yep. Time to buy those winter coats and boots. usually 50% off, dometimes 75% off
Where are the sales Michael Snyder? Generally when inventory’s rise items get cheaper. Econ 101 Michael. Where are the sales?
FYI The DemoRatic Presidential Debates will be on Monday April First 2019. All Half Wits welcome.
Interesting news about Apple that relates to this article. Apple announced it was going into the TV business, like netflix and were even going to start their own credit card.
That says to me they have no more new innovative products and they have to look for other revenue streams.
Not lowering prices you can finance a cup of coffee. 10cents a month you will have it paid off in 10 months. As long as they can give you monthly payments you will keep buying shit you don’t need. People will consume because stuf is made to break so you will consume more. There is no profit making quality stuff that can be repaired. This is why I don’t buy anything anymore. If shoes were like they used to be you’d probably only need three pairs to get through life. They used to be re soleable. All the cobblers went out of business cus the cheap shoes can’t be resoled or welted anymore. Just throw them out. Sneakers are complete shit. Even appliances like fridgerators that cost north of $1000 are made from shit plastic and parts are so expensive on purpose to dis incentivize you to repair it for $500. I’ve heard some new cars have a sealed transmission so you can’t add or change trans fluid. So instead of servicing it to extend its life you will replace it and you will pay. The fucking dump is a mountain of consumer shit and it seems it’s gonna get bigger cus there is no stopping people from selling junk. Don’t worry about the warehouses they move shit daily consumerism is the backbone of the rubbish business.
Also, in a grid down forever SHTF case, it is good to know that about anything you would need is already in a warehouse, somewhere…
So those warehouses full of unsold imported crap. They where in all likely hood imported before Trumps Trade War. So Trumps Trade war has nothing to do with that. Now The Trade war has likely reduced the Export of Midwest grain commodities. That’s good because there will be less available in the USA. and if we don’t export the excess and sell it for less than the cost of production. Those farmers who do make a crop will possibly have a viable domestic market and not need a Government Support Price subsidy Payment? There is always a silver lining. Its simply many folks are doom and Gloom. Chicken Little Mental Midgets.
Gasoline and food prices are going up which cuts into what people have to spend on other things. The flooding and other problems that agriculture has had will cause a large increase in food prices. The American consumer has little savings, lots of debt and lives paycheck to paycheck. This spells trouble.
Most of the SHTF scenarios involve a degree of human control;people have to do or not do something to bring it on. Humans can react to ameliorate the effect of the SHTF event. The one that we have no control over is the concept of our climate being controlled by long-term cycles of solar activity. The climate changes as the solar activity goes through decades-long cycles. The cycles translate into decades where harvest are relatively plentiful followed by decades of reduced harvests particularly of grains. It’s happened in the past and has resulted in the rise of fall of empires. The flooding/drought events in the news indicate the beginning of decades of reduced grain harvests. I know it sounds like the “sky is falling!” hysteria. I don’t know for sure but this one seems more real.