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Economy in Brief

U.S. Business Inventories'Increase Down With Slower Sales Growth
by Tom Moeller October 15, 2007

Weakening growth in U.S. sales has necessitated a dramatic slowing of growth in business inventories during the last year.

Annual growth in business sales has more than halved to 3% as of August. That decline has been led by weaker growth in manufacturers' sales to 2.4% from 8.5% one year ago and slower growth in merchant wholesale sales to 6.8% y/y from 12.3%.

Retailer's sales have held up relatively well at 5.0% over the last year versus 6.2% during all of 2006, though that year's strength was concentrated early in the year and then fell off.

Total business inventories rose 0.1% in August. Y/Y growth, a measure of the trend, dropped down to 3.0%, half that for all of 2006.

Retail inventories grew 0.5% (2.6% y/y) in August. The inventories of motor vehicles & parts dealers were relatively firm at 1.5% (1.3% y/y) in August but that is down from 12.8% y/y growth twelve months ago. Excluding autos, retail inventories were unchanged in August and twelve month growth of 3.3% was about even with 2006, but both were down from 7.9% at the beginning of 2005. Furniture inventories fell slightly in August and twelve month growth of 1.5% has dropped from 4.2% last August and 11.1% at the beginning of 2005. At clothing & accessory stores, August inventories were about unchanged m/m and twelve month growth of 5.8% compares to 13.2% at the beginning of the year.

Wholesale inventories increased 0.1% and y/y growth of 4.4% is half that of last year. Petroleum inventories were about unchanged versus last year versus 60% growth at the beginning of 2006. Still, less petroleum wholesale inventories are up 4.5% which is about half the twelve month growth for all of last year.

Factory inventories actually fell slightly in August as part of a weakening trend since last year which has brought twelve month growth down to 2.4% from 8.5% at the middle of last year.

Business Inventories August July Y/Y 2006 2005 2004
Total 0.1% 0.5% 3.0% 5.9% 6.2% 7.9%
  Retail 0.5% 1.0% 2.6% 3.2% 2.8% 6.8%
    Retail excl. Autos 0.0% 0.1% 3.3% 4.5% 4.5% 7.2%
  Wholesale 0.1% 0.2% 4.4% 8.6% 7.4% 9.7%
  Manufacturing -0.1% 0.1% 2.4% 6.4% 8.9% 7.7%
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