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Economy in Brief

U.S. Business Inventories' Trend Growth Slower
by Tom Moeller July 15, 2008

Total business inventories rose 0.3% during May after a 0.5% April gain. The latest increase fell short of expectations and it reduced three-month growth in inventories to 4.1% (AR) which was its slowest since November.

Retail inventories fell 0.4% and reversed all of the March increase. The three-month growth rate fell further to a negative 2.2% which reflects the draw-down of automobile inventories. Inventories of motor vehicle & parts fell at a 7.6% annual rate during the last three months due to further production cutbacks. Outside of autos, retail inventories rose at a slight 0.4 rate over the last three months versus a 2.7% rise last year and a 4.9% increase during 2006.

The industry detail in the retail sector indicated that furniture inventories fell at a 1.4% rate during the last three months. Clothing & accessory store inventories continued to fall sharply at a 4.1% rate while general merchandise stores' inventories dropped at a 2.0% rate.

Wholesale inventories rose at a 9.7% rate during the last three months, boosted by the rise in oil prices but less petroleum inventories also rose at a firm 9.8% rate which was twice the rate of increase during all of last year.

Factory inventories rose 0.5% after the sight decline during April. Three-month growth fell to 5.9% (AR) which was half the growth earlier this year. Despite the rise in oil prices, petroleum inventories still rose at a modest 2.1% rate over the last three months. Elsewhere, factory inventory accumulation has been fairly steady in 2008 at a 6.2% rate.

Total business sales surged again, in May by 0.8%. Three-month growth jumped to a 15.1% annual rate.

The inventory-to-sales ratio for all business fell to 1.24 in May which was the low for this cycle.

Fed Chairman ChairmanBen S. Bernanke's Semiannual Monetary Policy Report to the Congress can be found here.

Business Inventories May April Y/Y 2007 2006 2005
Total 0.3% 0.5% 5.3% 3.8% 5.9% 6.0%
  Retail -0.4% 0.4% 1.7% 2.6% 3.5% 2.3%
    Retail excl. Auto -0.2% 0.7% 1.6% 2.7% 4.9% 3.9%
  Wholesale 0.8% 1.4% 8.7% 5.5% 8.3% 7.3%
  Manufacturing 0.5% -0.0% 6.1% 3.7% 6.4% 8.9%
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