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Economy in Brief

U.S. Inventory Accumulation Up A Bit
by Tom Moeller January 12, 2007

Total business inventories rose 0.4% in November following a downwardly revised 0.2% October gain. Consensus expectations had been for a 0.3% rise and over the last three months the 0.3% average increase was the slowest since September of last year.

During the last ten years there has been a 57% correlation between the y/y change in business inventories and the change in factory sector industrial production. Using quarterly figures, there has been an 84% correlation between the change in real private nonfarm inventories and production.

Business sales rose 0.5% (4.0% y/y), the first increase in three months. Wholesale sales led the gain with a 1.0% (7.95 y/y) pop and retail sales rose 0.6% (4.3% y/y). Factory shipments ticked up 0.1% (0.7% y/y). As a result the inventory to sales ratio was stable at 1.30 for the third month.

Retail inventories fell for the third straight month but excluding autos they rose 0.3%. General merchandise inventories rose 0.2% (2.9% y/y) and have been accumulating strongly since May. Clothing store inventories surged 1.6% (9.7% y/y), the third month of strong gain. Furniture inventories fell for the second month with a 0.2% decline (+4.3% y/y).

Business Inventories November October Y/Y 2005 2004 2003
Total 0.4% 0.2% 6.9% 4.4% 7.6% -1.0%
  Retail -0.3% -0.2% 4.0% 2.7% 6.7% 3.8%
    Retail excl. Autos 0.3% 0.2% 4.6% 4.5% 7.1% 1.9%
  Wholesale 1.3% 0.4% 10.1% 7.1% 9.8% 1.8%
  Manufacturing 0.2% 0.3% 7.1% 4.0% 6.9% -7.4%
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