Dollar flexes muscles (also Retail Sales Numbers)

JCMach1

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Wed Apr-14-04 04:43 AM
Original message

Dollar flexes muscles (also Retail Sales Numbers)

The dollar extended its rally against major counterparts yesterday after a strikingly strong US retail sales report confirmed recent indications of robust economic recovery.

The retail sales data from the US Department of Commerce showed a climb of 1.8 per cent in March, easily topping economists' forecasts for a rise of 0.6 per cent.

In addition, February US business inventories climbed 0.7 per cent, higher than expectations and signalling stronger than expected economic growth, analysts said.

"The stronger-than-expected retail sales and inventories numbers continue to highlight the strength in the first quarter GDP (gross domestic product)...
http://www.gulf-news.com/Articles/Business2.asp?ArticleID=117927

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mhr

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Wed Apr-14-04 04:51 AM
Response to Original message

1. Growing Inventories Is Usually Not A good Sign

A strong economy would be marked by falling inventories and growing retail sales.

This would stimulate manufacturers to hire additional workers to produce goods meeting demand and maintaining inventories.

Seems that these are mixed economic indicators at best.

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mikey_1962

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Wed Apr-14-04 05:40 AM
Response to Reply #1

2. Not for us, we are an auto supplier.... GM ordered us to stockpile

But the auto market is weird to say the least

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Frodo

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Wed Apr-14-04 08:01 AM
Response to Reply #1

3. Actually

A growing economy would be marked by rising inventories and rising retail sales. Since retail sales are growing even faster than inventories, the inventory/sales ratio is actually decreasing.

In short - it's a "good" number. In fact, if inventory were NOT to gain at an appreciable rate, it would cause a risk to future sales growth and spark higher prices.

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mhr

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Wed Apr-14-04 12:06 PM
Response to Reply #3

4. Disagree Frodo - That Is An Economics Definition

All business tries to keep inventories as low as possible since inventories represent stagnant capital on the balance sheet.

Anytime inventories rise without a similar rise in sales, the business is not growing revenue and is losing money in trapped inventories.

This is a case were the economists and CEOs disagree on metrics.

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Frodo

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Wed Apr-14-04 12:28 PM
Response to Reply #4

5. Read that again please.

Anytime inventories rise without a similar rise in sales,the business is not growing revenue and is losing money in trapped inventories.

That is a (generally) true statement. The problem is that it does not represent the current situation. Since the inventory/sales ratio actually decreased with this report, we know that sales increased by MORE than the amount inventories increased.
Both wholesale and business inventory reports, while normally unimportant) were high enough to boost expectations for the 1st Quarter GDP. Of course NOW that means more evidence of the need to raise rates to fight inflation and could mean a market dip. We'll see.

A couple quotes.

Inventory rebuilding will provide a welcome boost to 2004 production given lean supply and strong demand.

Sales growth has exceeded inventory growth since June to leave a continued downward trend in I/S ratio.

Inventory growth will have to accelerate shortly as record low I/S ratio risks lost sales.
2004 production boosted not only by strong sales (demand) but the clear need for inventory rebuilding.

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