Retailers have seen their inventories explode due to shipping delays due to the pandemic.
A 26% rise in inventories since this time last year has taken it to $44.8 billion between S&P consumer indexes with a market value of at least $1 billion and reported earnings over the past two weeks, according to a Bloomberg report summed up. Target reported a 43% increase in inventory, Walmart a 32% increase, Macy’s a 17% increase and Costco a 26% increase.
Retailers now have to pay more storage fees or apply discounts to make room for more inventory. The latter could be particularly difficult for companies given the sharp rise in inflation. Excess inventories have typically signaled a recession and/or general economic downturn in the past. Goldman Sachs projects a 35% chance of a recession in the next two years, while Wells Fargo’s economic model projects a 30% chance of a recession occurring in the next six months alone.
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The Congressional Budget Office said in a report earlier this week that real US gross domestic product would rise 3.1% this year.
Walmart shares are up above $128 per share as of this writing, along with Costco above $470 per share, Target above $167 per share, Macy’s above $23 per share and Gap up over $11 a share.
Meanwhile, the personal consumption spending price index fell to 6.3% in the 12 months to April. Adjusted for inflation, consumer spending has continued to rise by 0.7% since March. That’s the highest rate it’s increased in the last three months.