Retail inventories — the amount of stuff sitting on store shelves — have been slowing for months. That all changed in July, when inventories surged by 1.3%.
Storing stuff on shelves and in warehouses costs money and time, so businesses don’t like to do it if they don’t have to. Plus, what if nobody buys your extra stuff — then what? For the past year or so, businesses have been especially skittish and haven’t been stocking their shelves very deep at all.
“I think a lot of that has been driven by a lot of the policy uncertainty over the last 18 months,” said Michael Pearce, chief U.S. economist at Oxford Economics.
On-again, off-again tariffs and war make for twitchy business planning. But it’s possible that businesses are now deciding it’s been long enough: Let’s do it, let’s buy more stuff.
“Wholesalers are having to increase their inventories because their sales have just been so remarkably strong this year,” said Jason Miller, a professor of supply chain management at Michigan State University. “Through June, sales were up 17% year over year.”
He said a lot of that is for artificial intelligence and data centers.
“Machinery and computers and electrical goods,” Miller said.
Those things are not the whole economy. And it may be that elsewhere in the land of inventories, retailers are stocking up again not because of AI but because of the latest trade war.
“We obviously had a period where tariffs were a bit lower, and then we’re kind of approaching periods where they’re likely to be higher again, so that may have caused some tariff front-running,” said Stephen Brown, chief North America economist at Capital Economics
But any time you have extra stuff sitting on shelves, whatever it is, there’s that nagging question: Are people going to buy it?
“Some of these imported products are simply not being sold,” said Gregory Daco, chief economist at EY Parthenon.
Businesses don’t like that. Time is money, yes, but so is shelf space.
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