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Economy in Brief

U.S. Business Inventories Up a Bit More Than Expected
by Tom Moeller Mach 14, 2006

Though the rate of gain halved, total business inventories rose 0.4% during January following an upwardly revised 0.8% December gain. The Consensus expectation had been for a 0.3% increase.

From the GDP accounts, nonfarm inventories contributed a hefty 1.6 percentage points to economic growth last quarter due to production increases necessary to keep the rate of inventory accumulation steady in the face of strong sales.

Retail inventories increased 0.5% following an upwardly revised 0.8% rise during December. Motor vehicle inventories rose 0.6% (1.0% y/y) following five months of between 1% and 2% accumulation. Retail inventories less autos rose 0.5% (4.3% y/y) due to a 0.8% (4.7% y/y) gain in furniture. Apparel inventories fell 0.5% (+3.0% y/y) after a 0.3% December gain that was half the rise initially reported and general merchandise inventories also fell by 0.1% (+3.6% y/y) after two months of 0.4% increase.

Wholesale inventories rose just 0.1%. Durables rose 0.3% (5.9% y/y) but nondurables fell 0.1% (+5.3% y/y). During the last ten years there has been a 67% correlation between the y/y change in wholesale inventories and the change in imports of nonpetroleum goods.

Factory sector inventories rose 0.5% after an upwardly revised 0.6% gain during December.

The inventory to sales ratio for total business fell to a new low of 1.24 as the 1.3% (8.5% y/y) rise in business sales outpaced the gain in inventories.

Monetary Policy Shocks, Inventory Dynamics, and Price-setting Behavior from the Federal Reserve Bank of San Francisco can be found here.

Durable Goods Inventories and the Volatility of Production: Explaining the Less volatile U.S. Economy from the Federal Reserve Bank of St. Louis is available here.

Business Inventories Jan Dec Y/Y 2005 2004 2003
Total 0.4% 0.8% 4.0% 4.4% 7.7% 1.5%
  Retail 0.5% 0.8% 3.2% 2.8% 5.5% 3.9%
    Retail excl. Autos 0.5% 0.7% 4.3% 4.5% 5.9% 2.0%
  Wholesale 0.1% 0.9% 5.7% 6.7% 10.8% 2.0%
  Manufacturing 0.5% 0.6% 3.5% 4.4% 7.7% -1.1%
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