Business Inventories Fall for First Time in Two Years
This report offered some hope that inventory imbalances could be improving, Reuters reported. After several months of trucking and rail companies issuing earnings warnings because of reduced demand, some said they thought things were picking back up.
However, there have been numerous reports in April from freight-hauling companies warning that March was a weak month. That suggests that the extra business they got in February to draw down inventories could have been temporary, rather than a sign of underlying strength in demand.
If businesses see inventories pile up, they are forced to sell many of those goods before having more manufactured and delivered to restock warehouses or stores. So, while an inventory adjustment is under way, it can distort normal flows of trucked freight until normal supply-demand patterns resume.
Bloomberg noted the Fed will most likely continue cutting interest rates if it appears production is likely to remain weak.
Analysts had been expecting inventories to be unchanged in February, but it was turned out to be the first decline since December of 1998 and the largest fall since a 0.3% contraction in March 1996.
The report also said sales of goods fell 0.3% in February. The stock-to-sales ratio, a measure of how long it would take to totally deplete stocks at the current sales pace, held steady at 1.37 months.
That is especially important for dry van freight because if the ratio moves higher, it means companies will have to working down their current supplies on hand before having more goods shipped. Transport Topics
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