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Economy in Brief

U.S. Business Inventories Fell
by Tom Moeller September 16, 2005

Total business inventories fell in July for the second month. The decline lowered the three month change in inventories to -1.5% (AR) versus a 12.1% peak rate of accumulation through last August. The ratio of inventories-to-sales dropped to a new record low of 1.26 as business sales rose 1.1% (8.2% y/y), goosed by a surge in auto sales.

Retail inventories plummeted 1.8% due to a 5.4% drop in auto inventories. Excluding autos, however, retail inventories fell only slightly (+5.9% y/y). Furniture inventories fell 0.2% (+7.9% y/y) and inventories of apparel were unchanged (5.9% y/y).

Factory sector inventories rose for the first month since March.

Wholesale inventories fell 0.1% pulling three month growth down to 2.8%, the lowest since 2003. 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.

Business Inventories July June Y/Y 2004 2003 2002
Total -0.5% -0.0% 4.2% 7.7% 1.4% 1.6%
  Retail -1.8% -0.5% -0.4% 5.7% 3.9% 5.9%
    Retail excl. Autos -0.0% 0.4% 5.9% 5.9% 2.0% 2.3%
  Wholesale -0.1% 0.4% 8.2% 10.8% 2.0% 1.2%
  Manufacturing 0.5% 0.1% 6.0% 7.5% -1.3% -1.8%
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