US retail inventories continue sharp growth; could be a hedge against coming tariffs
The latest inventories data from the US Census Bureau shows that US retailers are continuing to grow inventories, beyond what sales can accommodate for.
Figure 1 shows the development in the size of the retail inventories, as well as a trend line matching the 2009-2019 developments. It is clear here that the orange line depicting the inventories is exceeding the blue trend line. In absolute terms, the deviation, in November 2024, reached a point where the retailers’ inventories are 30.2 billion USD higher than what can be accounted for by the normal trend development.
Which brings us to a very important question: how much have actual retail inventories deviated from the trend line since 2011, when most of the post-financial crisis effects had disappeared? This is shown in Figure 2.
The upwards spike in July-August 2024 is not only very visible, but also the largest upwards deviation we have seen since the financial crisis. The largest deviation was seen in September 2024 at an excess of 3.1%, but in October and November this only very marginally declined to a level of 3.0%. It would therefore be correct to say that not only are the retailers building inventory, but they are also now building inventory which is very excessive compared to the long-term trend.
For some retailers, inventory build-up may be a hedge against coming tariffs. On the other hand, a potential implication is that if consumer spending suddenly is reduced due to the inflationary effect of tariffs, the retailers might well have excess inventory on their hands, as per a Sea-Intelligence analysis.
Source: Exim News Service: Copenhagen, Jan. 26