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Economy in Brief

U.S. Inventory Accumulation Continued 
by Tom Moeller August 13, 2007

Total business inventories in June rose 0.4% following the unrevised 0.5% increase the month prior. Together, the increases raised the three month growth accumulation rate to 5.3%, its fastest since last Autumn. The June increase exceeded Consensus expectations for a 0.3% one month rise.

Retail inventories rose 0.5% after the May gain of 0.7%. Auto inventories led the June gain and jumped 1.0% after moderate increases during the prior three months that were upwardly revised. General merchandise inventories increased 0.2% (6.5% y/y), half the May gain of 0.4% but clothing store inventories fell 0.2% (+6.7% y/y) after a 0.4% May gain that was revised down. Furniture inventories reversed the prior month's decline with a 0.6% (0.2% y/y) rise.

Business sales fell 0.3% (+3.3% y/y) as retail sales slumped 0.9& after the prior month's 1.7% surge. Less autos, retail sales fell 0.2% following the 1.7% jump during May. Factory shipments fell 0.6% (-0.9% y/y) but wholesale sales increased 0.6% (8.1% y/y) with the strength in U.S. imports. During the last ten years there has been an 87% correlation between the y/y change in wholesale sales and the change in merchandise imports.

The inventory to sales ratio ticked up, off its low level during the prior month.

Business Inventories June May Y/Y 2006 2005 2004
Total 0.4% 0.5% 3.6% 5.9% 6.2% 7.9%
  Retail 0.5% 0.7% 1.3% 3.2% 2.8% 6.8%
    Retail excl. Autos 0.2% 0.7% 4.0% 4.5% 4.5% 7.2%
  Wholesale 0.5% 0.5% 6.3% 8.6% 7.4% 9.7%
  Manufacturing 0.3% 0.4% 3.7% 6.4% 7.9% 7.7%
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