Forecasts looking for inventory restocking to boost growth in the second half had best look elsewhere. I noted this for manufacturers the other day and today's personal income report presages retail sales data that will prove out that retailers still have too many goods on hand.
Wage and salary disbursements totaled $5,031 billion in July, up marginally from $5,025 billion in June but $30 billion less than April and $380 billion below year ago levels -- a 7.4% year-over-year decline. This never-before-seen-since-the-Depression loss in purchasing power happens when payrolls lose 5.7 million jobs in 12 months and there is no inflation. As employment losses slow so too will the loss in income and whenever firms start hiring again wage disbursements will rise as well. But there is a long way to go before all this lost income is regained and in the meantime the accumulated loss in wealth keeps getting bigger. Mix the debt burden into all of this and consumers will be leading the economy but only to less profligate ways.
It is no wonder that control retail sales (sales less autos, building supplies and gasoline) collapsed with incomes (see chart), but the extent of the collapse evidently shocked retailers -- as evidenced by the big jump in the retail inventory/sales ratio (not including motor vehicle and parts dealers). The ratio has fallen from its recent peak but it is still far enough above pre-recession levels to suggest that retailers will keep selling from their shelves. Inventory spending is a long way off.