Friday, April 8, 2022

More data keeps showing our early 2022 inflation isn't a supply shock

I was looking at this Census Bureau report on wholesale sales and inventories, and it shows no evidence of tight supplies as February ended. In fact, inventories have continued to grow along with sales, so the ratios are no different than they were in early 2021.

Change in wholesale sales, inventories, Feb 2022 vs Feb 2021
Sales +9.9%
Inventories +10.9%
Inventory/sales ratio 1.56 Feb 2022 vs 1.54 Feb 2021

Sales +40.6%
Inventories +46.6%
Inventory/sales ratio 1.58 Feb 2022 vs 1.52 Feb 2021

Sales +22.4%
Inventories +25.9%
Inventory/sales ratio 0.73 Feb 2022 vs 0.71 Feb 2021

Farm Products
Sales +26.1%
Inventories +24.0%
Inventory/sales ratio 1.43 Feb 2022 vs 1.45 Feb 2021

The only place where the sales-to-inventory ratio got tighter was in petroleum (0.29 in Feb 2022 vs 0.38 in Feb 2021). But Feb 2021 was a pre-vaccination time when travel was still depressed, and gas if you look at the amount of gasoline available as March ended, it was higher than what was available in the last half of the 2010s, and even higher than it was at that time last year.

Yes, I know some of this data came in before Russia invaded Ukraine and the last week of March can be a bit jumpy due to Spring Break stuff. But it's also clear that gasoline supplies weren't any tighter than we'd seen in other years when we weren't on lockdown. And while I understand that many products have a world price that overrides some of the supply-and-demand situation here in America, that doesn’t mean prices should be the same everywhere on the planet.

Given that there was sufficient supply of a lot of things before the breakout of war in Eastern Europe, and because the States haven’t yet seen much of a change in what’s available in the 6 weeks since then, there is no reason for the massive jump in prices that we’re seeing today and the gas price gouging of March. Well, beyond speculation and rent-taking from businesses and producers, neither of which helps the average American.

So yes, I remain suspicious of what is causing our “inflation”, because much of the data that I’ve seen in the recent months doesn’t indicate that the US is seeing large-scale shortages that warrant such a high increase in prices.

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