Measuring Consumer Confidence With Inventory Data

By: SoFi General · January 18, 2023 · Reading Time: 3 minutes

The Outlook

Investors just got a fresh wave of inventory data, in the form of WarehouseQuote’s Warehouse Pricing Index. According to this report, national warehouse storage remains higher-than-average, but stayed stagnant for the last few months of 2022.

Now that the holidays are over, some insiders believe that warehouse storage is likely past its peak and will gradually decline as retailers continue to move out marked down goods.

What Does This Mean?

Warehouse inventory data measures the stock of unsold goods sitting in warehouses across the country.

Lower-than-average inventory can be a sign that consumers are buying more goods than normal. When consumers buy more goods, retailers pull more stock from storage to keep their shelves full, resulting in less inventory left in the warehouse. Higher-than-average inventory signals the reverse, entailing decreased consumer spending, resulting in increased goods in warehouses.

Inventory rose steadily and drastically over the past few years, peaking toward the end of 2022. Overconfident supply and underwhelming demand made an unpleasant combination for retailers, who faced an inventory crisis leading into the holidays. Levels did not fall significantly in November or December, signaling that even the holiday shopping season did little to remedy this.
However, based on latest warehouse data, it would appear Christmas wasn’t canceled for retailers — it just came late.

Looking Forward

Inventory levels have been considered higher-than-average since 2021, suggesting that high inflation and the economic slowdown have been hurting consumer spending for years. This new data is a positive sign for retailers, but as WarehouseQuote notes in the report, “we still have a ways to go before reaching ‘normal’ inventory levels.”

This continuing quandary for retailers has its perks for consumers as retailers will likely continue to mark down products as they attempt to drive traffic to stores and bring their inventory levels closer to normal. That said, you might just take part in solving the inventory crisis — by snatching up some quality goods on super sale.

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