Raw materials and finished goods at record highs
In the UK factories have been stockpiling at the fastest rate since 1950. The latest CBI data out has expectations for UK export orders falling to their lowest levels since 2009. Total orders expectations came in at -5 vs 2 expected. Also, the stock of finished goods was the highest since 1960. So, lots of raw materials in the warehouse, and plenty of finished goods with...nowhere to go. Look at the graphs below from Reuters for the details. All of this bodes for something Justin first warned us about - the bull whip effect. Look out for it in the coming weeks. If you didn't catch the article you can check it out here.
The US GDP data on Friday seemed to be hit with a similar problem. Although the headline was a beat , at 3.2% vs 2.3% expected, the details betrayed that trade and inventories were the key drivers. Here is Adam's comment on the numbers at the time:
Inventories and trade were big driving factors in the beat and consumer spending was also a slight positive. The problems with the trade and inventory numbers is that they're likely to reverse. Inventories are the highest since 2015.
This saw a USD reversal as the details were digested. This sends a warning for Q2 GDP for the UK and the US, as trade uncertainty driven high inventory levels come home to roost.
