No Change in U.S. Business Inventories

A report from the U.S. Commerce Department stated business inventories in January remained unchanged, lower than analysts were looking for, as they thought there would be a slight increase of 0.2 percent.

Sales increase by what was called a strong performance by some, gaining by 0.6 percent.

The problem with those numbers those when taken together with no inventory changes, is that could have been generated by sales to blow out inventory that didn't sell during the holiday season.

So that probably means those numbers were generated from product moving from steep discounts rather than by consumers increasing spending. That's why inventories remained the same while sales increased; they were moving merchandise in order to prepare for the spring season. I wouldn't be too excited about these sales numbers, as quarterly reports will confirm and bear this out.

Some economists have made the comment they hope retail stores will start restocking, as it would supposedly help the economy recover on a more sustainable basis.

The problem with that is demand alone drives inventory, and if people aren't buying it doesn't matter how much you fill a store up, it's going to sit on the shelves, and only deep discounts will move it out of there, and as the numbers show, even discounts are not enough to increase the inventory in stores, as they're continuing to replenish only and not add to the merchandise offered in their stores.

Although inventories did increase in October and November, that was the usual seasonal adjustment, and considering the 13 months before that inventory fell, it continues to be a sign that the U.S. is far from being in recovery, and won't be for some time.

Even though the Commerce Department attempted to spin the 0.6 percent increase in sales as proof of demand improving, I guess the stores forgot about that, as they didn't add to their inventories in response. Since most of them overall did this, they're either all incompetent, or they know the sales came from getting rid of inventory in preparation for spring. It's nothing more than that, and the Commerce Department knows it.

If sales were really for new and full-priced goods, inventory would be increasing in line with those sales, it's as simple as that.