Weekly Updates
Weekly Updates
- The inventory turnover ratio is a number that matters. This measures how often a company’s inventory has been sold over a given period—an annual inventory turnover of 8 would mean that a company sells and restocks its inventory eight times each year.
- Inventory turnover indicates how quickly US President Trump’s trade taxes will hit US consumers. Once pre-tariff inventory has been sold, prices will need to rise. If inventory turns over quickly, consumers will pay the trade taxes within weeks. As former UK Prime Minister Truss can attest, a stored lettuce does not last very long—tariffs on imported lettuces are paid by consumers with days.
- Sectors with lower inventory turnover need not raise prices so quickly, as companies sell their pre-tariff inventory. Clothing retailers, for instance, may hold three months’ worth of inventory (partly because it takes six weeks to import clothing from Asia).
- Overall, the US economy turns over inventory every three months, so trade taxes imposed in April should visibly raise consumer prices this summer. Sectors with high inventory turnover will likely raise prices earlier. Lower inventory turnover companies may raise prices in anticipation of tariffs, and retailers choosing to engage in profit-led inflation will raise prices based on the story of tariffs more than the reality.
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