Text: Yan Xiang, Shi Lin
Core conclusionsThe inventory growth rate in the United States has continued to increase since the beginning of the year, and it is in the early stage of replenishment as a whole: (1) The growth rate of nominal inventory in the United States has continued to increase since the beginning of the year, and it is in the early stage of replenishment as a whole: the growth rate of nominal inventory in the United States has increased from 0.3% at the beginning of the year to around 1.0% in April, and manufacturers, wholesalers, and retailers have all increased significantly, among which retailers have maintained a leading position; (2) The growth rate of durable goods and non-durable goods inventories improved significantly: the growth rate of durable goods increased significantly, from 1.8% in January to 2.6% in April; The decline in non-durable goods narrowed, rising to -8.4% from -9.4% in March. (3) The inventory of most categories is at a historically low level: the quantile of non-durable goods such as food, clothing, wine, and paper products is below 5%. From the perspective of the change of inventory quantiles, computer equipment, wood building materials, petroleum products, etc. have improved significantly; (4) The data of listed companies also verify that the United States has started the replenishment cycle: since the beginning of the year, the inventory growth rate of S&P 500 constituent stocks has bottomed out, of which the growth rate of industrial, communication services, and optional consumer inventories in 24Q1 has improved significantly. Europe is expected to gradually enter the replenishment stage during the year, but the strength is likely to be weaker than that of the United States: (1) the drag of European inventories on GDP has narrowed significantly, and it is expected to gradually enter the replenishment stage during the year: the contribution of European inventory changes to GDP has bottomed out since 23Q4, and has rebounded to around -0.9% by 24Q1; (2) Retailers have started replenishment, and manufacturers may be at the end of destocking: retailers' inventory assessments have continued to increase since the beginning of the year, while manufacturers' inventory assessments have fallen sharply in 23Q4, and there has been no obvious reversal since 24Q1, but they have not continued to decline, or reflect that the manufacturer's inventory level is likely to be nearing the end; (3) At the level of different industries: the inventory quantile of most industries is still low, and the inventory level of medicine, transportation equipment, papermaking, furniture, etc. is extremely low, or not far from replenishment, while communication electronics, wood products, coke, food, etc. have shown signs of replenishment; (4) It is expected to enter the replenishment stage within the year, but the magnitude may not be as good as that of the United States: With the European Central Bank starting to cut interest rates in June and the repair of the manufacturing industry since 23Q4, Europe is expected to gradually enter the replenishment stage in 24H2, but the economic repair is weak + the transmission of interest rate cuts to the economy still takes time, which means that the strength of European replenishment may be weaker than that of the United States during the year. The overseas replenishment cycle is launched, and exports are expected to improve marginally: (1) Historically, the inventory cycle in Europe and the United States is highly correlated with China's exports: overseas, especially after Europe and the United States open the replenishment, China's export growth rate usually rises, because developed economies such as Europe and the United States are still the main sources of external demand; (2) Overseas, especially in Europe and the United States, the replenishment cycle is launched, focusing on the subdivided industries with a high proportion of exports to Europe and the United States, a large amount and a low inventory: electrical equipment including consumer electronics, furniture, lamps, toys and other labor-intensive products may be relatively dominant; (3) However, it is necessary to be wary of the negative impact of limited inventory repair + trade barrier disturbance under the weak recovery of the global economy: at this stage, the global economy as a whole is still in a state of weak recovery, and the corresponding external demand repair or slow. Since May, there have been frequent trade barriers between Europe and the United States against China, and the impact on them needs to be continuously monitored. Risk warning: the economic recovery in Europe and the United States is slow; geopolitical risk disturbances; trade barriers are frequent.
The main body of the report
1 United States: 24Q1 replenishment cycle started
Since the beginning of the year, the growth rate of nominal inventories in the United States has continued to increase, and the overall growth rate is in the early stage of replenishment, among which the growth rate of retailers has maintained a leading position. As of April, the growth rate of nominal inventories in the United States has increased from 0.3% at the beginning of the year to around 1.0%, and the growth rate has increased month by month, indicating that the United States has entered a new round of replenishment cycle. According to the three major sectors, the nominal inventory growth rate of U.S. manufacturers, wholesalers and retailers in April was 0.4%, -1.7% and 4.8% respectively, all of which improved from the level at the beginning of the year, of which retailers still led (4.3% → 4.8%), manufacturers have turned from negative to positive (-0.6% → 0.4%), and the decline of wholesalers narrowed (-2.2% →-1.7%).
The growth rate of durable goods and non-durable goods inventories has improved significantly. In terms of the growth rate of wholesalers' inventories, the growth rate of durable goods has increased significantly since the beginning of the year, from 1.8% in January to 2.6% in April; The decline in non-durable goods narrowed, rising to -8.4% from -9.4% in March. In terms of details, in addition to metals and minerals and machinery and equipment, the inventory growth rate of the remaining seven categories of durable goods increased, of which hardware supplies (+1.9%), computer equipment (1.8%), metals and minerals (+1.5%) and other year-on-year improvements were the highest; Among the non-durable goods, the inventory growth rate of other categories except pharmaceuticals was still negative, but the decline rate of most categories was significantly narrowed, among which petroleum products (+5.8%), agricultural products (+3%), and food (+2%) led the year-on-year improvement. From the perspective of the quantile of inventory, the inventory of most categories is at a historically low level, of which the quantile of non-durable goods such as food, clothing, wine, and paper products is below 5%. Judging from the changes in the inventory quantile, computer equipment, wood and building materials, and petroleum products have improved significantly.
From the perspective of U.S. listed companies, the inventory growth rate has bottomed out since the beginning of the year, and the micro level also verifies that the United States has started a replenishment cycle. As of 24Q1, the inventory growth rate of S&P 500 constituent stocks in the United States rebounded to -0.2% from -0.8% in the previous quarter, ending a one-and-a-half-year downward trend, and the overall inventory replenishment was in the early stage. On the one hand, the improvement in inventory growth is due to the fact that after one and a half years of destocking cycle, the inventory has been at a low level at this stage, and on the other hand, the marginal improvement of the U.S. economy since 23H2 has driven the growth rate of corporate revenue and provided demand-side power for enterprises to replenish the warehouse.
In terms of U.S. stocks by industry, the growth rate of industrial, communication services, and optional consumer inventories improved significantly in 24Q1. As of 24Q1, among the S&P 500 sub-industries, industrial (-5.1% → 0.9%), communication services (-17.9% →-13.7%), and optional consumption (-11.0% →-6.9%) have the highest improvement rate, and the improvement trend is likely to continue under the catalysis of manufacturing repair + consumption is still resilient.
2 Europe: Replenishment is weaker than that of the United States
The drag of European inventories on GDP has narrowed significantly, and it is expected to gradually enter the replenishment stage this year, but the strength may be weaker than that of the United States. Due to the lack of stock data on European inventories, we draw on the ECB's research ideas and use the contribution of inventory changes to GDP in GDP accounting to approximate the European inventory situation. Since 2022, the contribution of European inventory changes to GDP has continued to decline, falling to a local low of -1.3% in 23Q3, while 23Q4 began to recover marginally, and has rebounded to around -0.9% in 24Q1. Looking ahead, with the European Central Bank starting to cut interest rates in June and the repair of the manufacturing industry since 23Q4, Europe is expected to gradually enter the replenishment stage in 24H2, but the economic repair is significantly weaker than that of the United States + the transmission of interest rate cuts to the economy will take more than half a year, which means that this round of European replenishment may be weaker than that of the United States.
The retailer has started to replenish the inventory, and the manufacturer may be at the end of the destocking. According to the European Commission's enterprise survey data, retailers' inventory assessment has continued to improve since the beginning of the year, while manufacturers' inventory assessment has dropped sharply in 23Q4, and there has been no obvious reversal since 24Q1, but it has not continued to decline, or reflects that the probability of destocking at the manufacturer level is nearing the end.
At the industry level, the inventory quantile of most industries is still declining, and the inventory level of medicine, transportation equipment, papermaking, furniture and other industries is extremely low, or not far from replenishment, while communication electronics, wood products, coke, food, etc. have shown signs of replenishment. As of May 2024, 12 of the 23 industries of European manufacturers are below the historical quantile of 50%, among which the inventory level of medicine, other transportation equipment, paper, furniture, etc. is low. According to the change of inventory quantiles, among the 23 industries, the inventory level of 15 industries is still declining, but communication electronics, wood products, coke, food, etc. have shown signs of replenishment.
3 The overseas replenishment cycle has been launched, and exports are expected to improve marginally
From the perspective of historical experience, overseas, especially in Europe and the United States, after the start of replenishment, China's export growth rate usually rises. In 2022, under the influence of factors such as the global central bank interest rate hike cycle + the Russia-Ukraine conflict, global demand continued to decline, the United States began to enter the destocking cycle from 22H2, and China's export growth rate fell sharply, and the decline in early 2023 once reached double digits. Starting from 2023Q4, with the marginal recovery of global demand, China's exports have rebounded significantly, and the cumulative decline by the end of the year has narrowed significantly.
Overseas, especially in Europe and the United States, the replenishment cycle has been launched, focusing on the sub-sectors with a high proportion of exports to Europe and the United States, a large amount and a low inventory. Judging from the analysis of inventory data in the United States and Europe, the United States is already in the early stage of replenishment, and Europe may be expected to enter the replenishment stage within the year. In terms of economic resilience, the U.S. economic performance has been stronger than Europe since the Russia-Ukraine conflict, and there is no sign of reversal yet. From the perspective of different industries, the inventory position of different industries is different, for domestic exports, the focus is on the United States exports to a relatively high proportion and large amount, while the inventory is in a low position of the industry, consumer electronics including electrical equipment, furniture, lamps, toys and other labor-intensive products are relatively dominant.
However, it is necessary to be vigilant against the limited inventory repair under the weak recovery of the global economy + the disturbance of trade barriers, which may have an impact on the repair of domestic exports. Looking ahead, driven by the recovery of the global economic and trade environment and the transition from destocking to replenishment in Europe and the United States, the external environment facing domestic exports is still improving. However, it should be pointed out that the repair of this round of overseas inventory cycle may be relatively limited, on the one hand, because the global economy as a whole is still in a weak recovery state, the US economy is resilient but there is still downward pressure under the constraints of high interest rates, and the economic repair in Europe is limited during the year, corresponding to the repair of external demand or slow. On the other hand, since May, the European and American trade barriers to China have been frequent, in May the US government announced tariffs on Chinese steel, aluminum, batteries, new energy vehicles and other products, and in June the EU announced additional tariffs on Chinese electric vehicles. The impact of trade barriers between Europe and the United States on exports needs to be paid attention to.
4 Risk Warning
The economic recovery in Europe and the United States is slow; geopolitical risk disturbances; trade barriers are frequent.
This article is from the report "Overseas Replenishment Cycle Starts" released by Huafu Securities Research Institute on June 21, 2024.
Analyst:
燕翔， S0210523050003
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