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Economy in Brief

U.S. Business Inventories Rise but Slowly
by Tom Moeller December 13, 2005

Total business inventories rose 0.3% in October following an unrevised 0.5% gain the prior month. Despite these increases, the ratio of inventories-to-sales held at the record low of 1.25 as business sales increased 0.8% (7.6% y/y).

Business' hesitancy to build inventory is evident from several aspects of the latest release. While the annual growth in business sales has slowed to 7.6% from 9.7% during all of 2004, the growth in inventories has nearly halved to 4.1% from 7.7% last year. And the following detail underscore that hesitancy.

Retail inventories rose just 0.1% and even that small addition was due to a 0.7% rise in motor vehicle inventories which followed large additions during the prior two months. Excluding autos, inventories fell 0.1% and the September increase was revised sharply lower. Clothing inventories managed a 0.3% (5.7% y/y) but general merchandise fell 0.1% (+6.2% y/y). Inventories of furniture fell by 0.3% (+5.8% y/y) for the fourth consecutive down month.

Wholesale inventories rose just 0.2%. During the last ten years there has been a 66% correlation between the y/y change in wholesale inventories and the change in imports of nonpetroleum goods.

Factory sector inventories jumped 0.6% led by a 3.7% surge at petroleum refineries.

Business Inventories Oct Sept Y/Y 2004 2003 2002
Total 0.3% 0.5% 4.1% 7.7% 1.4% 1.6%
  Retail 0.1% 0.8% 1.7% 5.7% 3.9% 5.9%
    Retail excl. Autos -0.1% 0.1% 5.1% 5.9% 2.0% 2.3%
  Wholesale 0.2% 0.6% 6.6% 10.8% 2.0% 1.2%
  Manufacturing 0.6% 0.1% 4.7% 7.7% -1.1% -5.4%
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