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Economy in Brief

U.S. Business Inventories Still Building
by Tom Moeller April 14, 2005

Total business inventories rose another 0.5% in February but figures back to 2002 were revised somewhat lower. Nevertheless, the y/y rate of inventory accumulation continued strong at 8.2% yet still lagged the improvement in sales growth. In February the ratio of inventories-to-sales rose slightly from the record low but remained below the year ago level.

Retail inventories rose 0.3% in February for the second month. Excluding autos, retail inventories moderated to the weakest gain in four months. Inventories of furniture & electronics (+7.1% y/y) fell for the second month and general merchandise inventories rose just 0.1% (5.9% y/y). Apparel inventories accumulated strongly (4.0% y/y) for the second month.

Factory sector inventories grew 0.5% following the 1.5% jump in January. Regardless, the 8.6% gain versus last year was the strongest since 1989.

Wholesale inventory accumulation moderated to a 0.6% gain but the double digit rise versus last year was the strongest since 1995. During the last ten years there has been a 64% correlation between the y/y change in wholesale inventories and the change in imports of merchandise.

Overall business sales fell 0.4% (+9.6% y/y) due to lower wholesale sales and a 0.9% decline in factory shipments.

Business Inventories Feb Jan Y/Y 2004 2003 2002
Total 0.5% 0.9% 8.2% 7.7% 1.4% 1.6%
  Retail 0.3% 0.3% 5.6% 5.7% 3.9% 5.9%
    Retail excl. Autos 0.4% 0.7% 6.9% 5.9% 2.0% 2.3%
  Wholesale 0.6% 1.0% 11.1% 10.8% 2.0% 1.2%
  Manufacturing 0.5% 1.5% 8.6% 7.5% -1.3% -1.8%
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