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Economy in Brief

U.S. Inventory Accumulation Raised Output
by Tom Moeller September 15, 2004

Total business inventories rose 0.9% in July, marking the eleventh consecutive month of accumulation. Consensus expectations were for a 0.7% increase. During the last ten years there has been a 60% correlation between the y/y change in inventories and the change in factory sector industrial production.

Retail inventories rose 0.6%, half the rate of accumulation in June. Higher auto inventories accounted for all of the gain with a 1.8% (12.4% y/y) rise. Non-auto inventories actually fell slightly following five months of moderate accumulation. Apparel (-0.1% y/y) & general merchandise (+3.6% y/y) accounted for the July drop.

Wholesale inventories jumped 1.3%, the third consecutive strong monthly increase. During the last ten years there has been a 62% correlation between the y/y change in wholesale inventories and the change in imports of merchandise.

Overall business sales rose 0.6% (+9.9% y/y).

The ratio of inventories-to-sales rose to 1.32 but remained below the 1.37 averaged last year.

Business Inventories July June Y/Y 2003 2002 2001
Total 0.9% 1.1% 6.4% 1.9% 1.5% -4.5%
  Retail 0.6% 1.2% 7.3% 4.9% 6.0% -2.8%
    Retail excl. Autos -0.0% 0.5% 4.8% 3.0% 2.6% -1.1%
  Wholesale 1.3% 1.1% 8.6% 2.2% 0.4% -4.5%
  Manufacturing 0.8% 1.0% 3.9% -1.3% -1.8% -6.1%
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