Many consumers are getting an annual raise next month. For others, cost-of-living adjustments increase their government benefits after the first of the year.
Social Security benefits are going up by 8.7% in 2023. Recipients will receive more than $8 billion in additional benefits.
This is welcomed news for cash-strapped consumers.
Some of the increase will help pay off debt accumulated as the cost of living soared this year. Some will spend it on purchases that were deferred as seniors and others struggled financially.
The money comes at a good time for consumers.
Retailers Face an Inventory Glut
Retailers’ inventories have increased. Part of the problem was the fabled supply chain issue. Retailers wanted to keep shelves stocked and overordered since they couldn’t know what would be delivered.
But the empty shelves have now been replaced by another problem: Retailers are holding too much inventory.
At general merchandise stores, a category that includes Walmart and dollar stores, the inventory-to-sales ratio is at 2007 levels.
Inventories Are Maxed Out
Source: Federal Reserve.
This ratio shows how much stuff retailers have sitting around.
The goal is to have just enough inventory to meet sales without tying up excessive amounts of capital or requiring large storage facilities. The ratio has been on a long downtrend since the 1990s as retailers adopted advanced management systems.
In recent months, the ratio jumped to 1.54. That’s up from a low of 1.2 in April 2021 when supply chain issues left many store shelves empty. It’s also well above the 15-year average of 1.42.
This indicates general merchandise stores have more than $15 billion in extra inventory. Similar situations exist in apparel, appliances, electronics and every other major retail category.
This is good news for consumers.
We should expect steep after-Christmas markdowns. Unfortunately, the discounts won’t last. Other data shows that new orders are down so retailers are cutting back on their inventory. After the excess inventory is sold, expect prices to continue rising.
Michael Carr, CMT, CFTe is the editor of two investment trading services — One Trade and Precision Profits — and a contributing editor to The Banyan Edge. He teaches Technical Analysis and Quantitative Technical Analysis at the New York Institute of Finance. Follow him on Twitter @MichaelCarrGuru.