Inventories drop as sales plummet

A man considers a shirt as he shops for clothes.

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KAI RYSSDAL: We learned today that business inventories were down for a third straight month in November. The actual number was seven-tenths of one percent down, that's according to the Commerce Department.

Sometimes it's a good thing when that happens. It can mean goods are flying off assembly lines and out of warehouses and into the backs of our SUVs at the shopping mall. Now's not one of those times. Instead, inventories are falling because businesses are putting orders on hold as sales continue to plummet as Marketplace's Mitchell Hartman explains.


MITCHELL HARTMAN: The number to keep an eye on here is something called the "inventory-to-sales" ratio. It tells us how long it's taking businesses to sell what they've already got sitting on shelves. It was up to 1.41 months in November, the highest since the 2001 recession.

Bernard Baumohl of the Economic Outlook Group says we're in a downward spiral.

Bernard Baumohl: Because as fewer shoppers come to the stores, it's going to take even longer for these retailers to sell off their goods. And there's certainly no reason at that point for retailers to order more stuff from their factories or from their wholesalers.

You can see where this is going. The factories and wholesalers lay people off, those people don't go shopping for a pair of shoes, or a new car. Which is what auto dealer Ray Ciccolo is grappling with.

Ray Ciccolo: Well, I've never seen anything quite like this.

Ciccolo has been selling cars for 46 years. He's got seven dealerships in the Boston area. At first, he couldn't sell SUVs.

CICCOLO: And then gas prices collapsed and we found that bigger cars were selling and the small cars stopped selling. But in general, we still have too much inventory.

The average dealership now has 2-1/2 months worth of cars sitting on its lot, and that glut of inventory has been rising for more than a year, leading to Ciccolo's final point:

CICCOLO: There couldn't be a more perfect time for a consumer to buy a car.

Which would start feeding back to the automakers and help get the economy going again.

I'm Mitchell Hartman for Marketplace.

About the author

Mitchell Hartman is the senior reporter for Marketplace’s Entrepreneurship Desk and also covers employment.

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