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Economy in Brief

U.S. Business Inventories Up
by Tom Moeller April 14, 2008

During February, total business inventories matched expectations and rose 0.6%. That followed a 0.9% January increase which was revised up slightly. The annualized three month growth in inventories rose to a quite firm annualized rate of 8.9%, the strongest since mid-2006.

Factory inventories continued to lead the quickened rate of accumulation. February inventories increased 0.5% following the very strong 1.3% January surge. The three month rate of accumulation remained double digit at 11.3% versus 7.2% during 4Q07 and 2.5% in 3Q. Higher oil prices continued behind some of that faster rate of gain. Petroleum inventories rose at a 60.7% rate over the last three months. But elsewhere accumulation also has been strong. Excluding petroleum, factory inventories rose at an 8.4% rate over the last three months versus 5.9% growth during 4Q and 1.7% in 3Q.

Retail inventories ticked up just 0.2% in February and three month growth remained subdued at 2.1%. Inventories of motor vehicle & parts during the last three months fell at a 3.3% rate due to production cutbacks. Outside of autos, retail inventories rose just 0.1%. The three month growth of 4.7% wasn't far off the pace of the last few years.

The industry detail in the retail sector indicated that furniture inventories fell for the fourth straight month and at an annual rate of 4.1% during the last three months. Clothing & accessory store inventories have been held under control and fell 0.4% after a large 0.7% January drop. The three month rate of change fell to a negative 2.2% rate. General merchandise stores' inventories need some further reining back. Though they rose just 0.2% in February, over the last three months they're up at an 8.1% rate after little change last year.

The gain in wholesale inventories continued strong at 1.1% in February and at a 51.7% rate during the last three months. Less petroleum, where inventory accumulation has been inordinately strong, wholesale inventory accumulation still has been very firm at a 13.4% rate over the last three months after 4.9% growth last year.

Total business sales fell 1.1% and three month growth went to a negative 1.7%. As a result of sales weakness and firm inventory accumulation the I/S ratio rose to 1.28 in February but that was still level with all of last year and before.

Business Inventories February January Y/Y 2007 2006 2005
Total 0.6% 0.9% 5.2% 4.0% 5.8% 6.2%
  Retail 0.2% 0.3% 3.0% 3.0% 3.2% 2.8%
    Retail excl. Auto 0.1% 0.2% 2.7% 3.3% 4.5% 4.5%
  Wholesale 1.1% 1.3% 7.4% 5.5% 8.3% 7.3%
  Manufacturing 0.5% 1.3% 5.5% 3.7% 6.4% 8.9%
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