Retail Inventories Rise, Mortgage Applications Hit New Low, Durable Goods Orders Increase
Retail Inventories Rise
More products are sitting on retailers’ shelves these days, as consumers trim discretionary spending to deal with rising prices for daily necessities like food and gasoline.
Retail inventories were estimated at $723 billion at the end of June, up 2% from May and up 19.9% from June 2021, the Commerce Department reported Wednesday. Wholesale inventories were estimated at $896 billion, up 1.9% from May and an increase of 25.6% from June 2021.
In a blog post Wednesday, the National Retail Federation trade group noted that supply chain disruptions have raised costs for many types of products and spurred some retailers to rethink how many items they want taking up shelf space in their commercial real estate when sales aren't as strong as they once were. Those retailers include the recently struggling JCPenney and Bed Bath & Beyond.
“The problem with Bed Bath & Beyond going into 2021 is that they were a retailer that merchandised with product,” David Marcotte, senior vice president at consulting firm Kantar, said in the post by NRF contributor Fiona Soltes. “Going into their stores, the product went from floor to ceiling. That was their motif, their value proposition for shoppers.”
The government’s inventory reports arrived after Walmart’s warning Monday that higher costs and unsold inventory would cut into second-quarter profits for the world’s largest retailer.
Mortgage Applications Hit New Low
Rising interest rates again took a toll on homebuyer activity, with mortgage applications for the week ended July 22 reaching their lowest level since February 2000, the Mortgage Bankers Association reported Wednesday.
This is the second consecutive week the trade group reported applications reached a 22-year low, though its weekly index does not report specific application numbers or dollar figures. Overall application volume was down 1.8% from the prior week, marking the fourth consecutive weekly decline.
Refinance applications were down 4% from the prior week and down 83% from the comparable week of 2021. New purchase applications were down 0.4% for the week and declined 18% from a year earlier.
“Increased economic uncertainty and prevalent affordability challenges are dissuading households from entering the market,” Joel Kan, the trade group’s associate vice president of industry surveys and forecasts, said in a statement. He noted this has led to declining purchase activity that is “close to lows seen at the onset of the pandemic.”
Durable Goods Orders Climb
One potential bright spot for the economy — and for property demand — is the June rise in orders for durable goods, generally big-ticket items that are meant to last more than three years. However, there are caveats tied to a still-clogged supply chain as many companies report manufacturing holdups related to delays in key component shipments.
New orders for manufactured durable goods rose $5 billion, or 1.9%, from the prior month to $272.6 billion, the Commerce Department reported Wednesday. That followed a 0.8% increase in May and marked the eighth month of increases during the past nine months.
The June increase was led by transportation equipment, with orders rising $4.5 billion, 5.1% higher than the prior month, to reach $92.7 billion.
Shipments of manufactured durable goods have now risen 13 of the last 14 months, with the $269.6 billion recorded in June up 0.3% from May. Computers and electronic products led the increase, rising 1.4% from May to $29 billion and showing increases for seven of the last eight months.
Inventories of durable goods have risen 17 consecutive months, reaching $484.8 billion in June and led by industrial machinery. On the flip side, led by transportation equipment, unfilled orders for durable goods have also now increased for 22 consecutive months, at approximately $1.1 billion for June.