Don't expect stocked clearance sections as the economy reopens

Why it matters: Retailers facing tight inventories are having a tough time keeping shelves stocked with new stuff. But this means there’s less stuff that’ll get marked down and moved to clearance sections.

• The temporary tight inventories are boosting corporate earnings growth and may also be skewing inflation figures.

By the numbers: According to the Census' business inventories report released on Friday, retailers' inventory levels were essentially unchanged from a year ago

• During that same period, sales jumped 23.5%.
• The inventories to sales ratio fell to 1.09 from 1.34 in the prior year, which means inventories are a lot tighter.
• This ratio was lower for most categories including cars, furniture and clothing.

What they’re saying: "When COVID hit, everyone was trying to get their inventories in line,” Pivotal Research senior analyst Mitch Kummetz tells Axios.

• “Pretty quickly we got into a situation where demand was outstripping supply.”
• “The fact that they are selling things at full price without having to discount — that's driving a lot of these big earnings that we've been seeing."

The big picture: This dynamic puts upward bias in the inflation reports we see, UBS economist Paul Donovan wrote on Friday.

• But it’s also among the reasons to believe the current elevated levels of inflation could prove transitory.
• “The process is about failing to cut prices (or cutting prices less than normal),” Donovan wrote. “It is not a signal of longer-term pricing power.”

What to watch: Retailers will announce quarterly earnings in August, and they’ll reveal to investors and analysts what’s going on with pricing and inventories.

Go deeper: The pandemic-induced renaissance of malls