China Confronts Mounting Piles of Unsold Goods

After three decades of torrid growth, China is encountering an unfamiliar problem with its newly struggling economy: a huge buildup of unsold goods that is cluttering shop floors, clogging car dealerships and filling factory warehouses.

The glut of everything from steel and household appliances to cars and apartments is hampering China’s efforts to emerge from a sharp economic slowdown. It has also produced a series of price wars and has led manufacturers to redouble efforts to export what they cannot sell at home.

The severity of China’s inventory overhang has been carefully masked by the blocking or adjusting of economic data by the Chinese government — all part of an effort to prop up confidence in the economy among business managers and investors. Read more >>

New and Used Car Sales Tumble

Besides GM stuffing its dealers with excess inventory at record levels to create the illusion of car sales, allowing the company to book revenue, not only has there now been a collapse in show room traffic, but car dealers can't close sales.

Based on sales data from roughly midway through May, CNW Marketing forecasts overall U.S. new car sales will be up only about 6 percent from May 2011 -- well below the double-digit pace of 2012 overall, year-to-date.

The used car market, where demand is usually higher than for new cars, is also weakening. And CNW claims there is a sharp decline in new car sales to young buyers. "In the late 1990s and early 2000s, they accounted for about 5 percent of the U.S. market. That’s now down to barely 2 percent among 16- to 21-year-olds."

Highest Consumer Price Increase in a Year

A busy month for car dealerships lifted retail sales for the first time in three months while more expensive food and gas boosted consumer prices by the most in nearly a year.

Retail sales rose 0.4 percent last month, buoyed by auto and gasoline station purchases. Most retailers reported declines for the month. Excluding autos, sales climbed 0.2 percent, the Commerce Department said Friday.

Consumer prices rose 0.3 percent in July, the Labor Department said. That's the largest increase since last August to the Consumer Price Index, the government's most closely watched inflation measure. Energy prices jumped for the first time in five months.

Excluding volatile food and energy prices, the so-called "core" index increased 0.1 percent in July. The cost of housing, clothes, and used cars and trucks all rose. Over the past year, consumer prices rose 1.2 percent. That's up slightly from last month's 1.1 percent pace but still a mild increase.

Broad declines in retail sales have economists concerned that spending will slow further in the second half of this year. Households are saving more and spending less as they struggle with high unemployment and lackluster job growth. More...