Inventories still exceptionally low

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Chart of the Day

Among the US macro data out yesterday, we learnt the US business inventories-to-sales ratio remained exceptionally low in September compared to pre-Covid level. That low inventory ratio, especially heading into the busy period for purchases around Thanksgiving and Christmas, is likely to keep upward pressure on prices in the coming months and explains why some economists think US inflation could hit 7% in the coming months. This indicator is worth paying attention to for that reason, as an improvement in Q4, now we’ve seen some signs of supply chain pressures easing, could help inflation to ease in 2022 and reduce the pressure on the Fed to hike.


US retail sales rose by 1.5% MoM in October, while control group retail sales – which feed into the GDP data for consumption – rose by 1.2%. A large part of those gains were due to higher prices though, with gasoline sales rising by more than most.

Meanwhile, US industrial production growth rose to 5.1% YoY in October, due to a +1.6% MoM move – implying a tentative easing of supply constraints. The ISM manufacturing index suggests growth should be sustained around this level.

In Canada, housing starts continue to fall from recent elevated levels.


The S&P 500 enjoyed a modest rise yesterday and is inches away from the prior record high again.

Some have questioned the reliance of equities when oil prices have been falling – though WTI also bounced a touch yesterday.

That isn’t the case for the main cryptos though, which fell further.

Similarly, the main commodity currencies have generally been losing ground to the USD.

That is mainly a reflection of USD strength though – the AUD rose against the CHF and JPY, so some encouraging signs in terms of risk-on sentiment.

The strength of the USD can be seen in the Dollar index – this is worth paying attention to as USD strength often coincides with a weaker performance for US equities.

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