When US consumers are immersed in an "unprecedented" discount season, when tight items during periods of supply chain chaos are randomly selected, US retailers are facing the worst "inventory crisis" since the bursting of the dotcom bubble.

And this is not just an internal problem in retailing.

According to the "big short prototype" Michael BurryThe previous oversupply in the retail industry has formed a "bullwhip effect", which will come to an end as demand slows and will trigger deflation later this year, prompting the Federal Reserve to reverse.The road to austerity, or even to restart easing.

The rise and end of "bullwhip effect"

In a little more than a year, the rise and end of the "bullwhip effect" has been staged in the American retail industry one after another.

Bullwhip effect is a phenomenon of distorted transmission of demand information in the supply chain. when suppliers at all levels of the supply chain only make supply decisions based on the demand information from their neighboring subordinate vendors, the unauthenticity of demand information will go up against the current of the supply chain and magnify step by step, resulting in a domino effect.

As a result, when demand heats up, retailers will quickly order goods to cover their positions, and the quantity ordered will usually exceed the actual demand, resulting in supply shortages among wholesalers and upstream manufacturers, which in turn leads to a rise in the price of end products. further stimulate production upward.

Apply to the global supply chain chaos of a year ago. At that time, the problem of supply gap caused by the epidemic was rampant, and American retailers and wholesalers panicked to buy supplies to replenish inventory, fearing that there was nothing to sell, which also led to the "resonance" of upstream manufacturers and began to raise prices at the same time and expand production.

Even so, inventory levels at retailers fell to decades-long lows, and many companies did not have enough inventory to meet consumer demand.

However, as demand began to cool, retailers' inventories soared.The Treasury-to-sales ratio, which once fell sharply, reversed sharply and even soared to its highest level since the bursting of the dotcom bubble.

In the case of a huge impact on demand, retailers are forced to scramble to clean up excess inventoryIt directly leads to a rapid collapse in the prices of many "core" products.

At this point, the impact began to seep into the core inflation level.

Core inflation is down? Reverse the path of austerity?

Although overall inflation in the United States can remain at an all-time high, the impact of the collapse in many commodity prices on core CPI should not be underestimated.

As a result of large discounts by retailers, the prices of most of the goods that make up the core CPI are likely to fall sharply within weeks or even days, while the core personal consumption expenditure price index PCE, the Fed's preferred indicator of inflation, to be released on Thursday, June 30, will mean that inflation other than food and energy is no longer "feverish". Traditionally, headline inflation, including food and energy, has been ignored by the Fed.

Credit Suisse analysts say the core US PCE may have peaked. They point out that most of the sectors that pushed CPI unexpectedly higher are excluded from the core PCE, including energy costs.

Whether the Fed will "ignore" headline inflation this time remains to be seen.But if the Fed takes into account that core inflation has moderated and truly realizes that the US economy is in recession, it is still likely to resume easing even if US gasoline prices soar to an all-time high of $5.