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Economy in Brief

U.S. Business Inventories Roughly Unchanged; I/S Ratios Depressed
by Tom MoellerMarch 12, 2010

There seems to be no hurry for businesses to accumulate inventories. A modest drop in January inventories followed a December decline that was little-revised. It left the rate of decline just a little less than at the peak rate of decumulation last summer. This drop occurred at the same time as a 0.6% increase (6.8% y/y) in January business sales. As a result, the inventory/sales ratio fell to the lowest level since late-2007.

Retailers' inventory/sales ratio remains at their cycle low. The I/S ratio for apparel stores fell to a record low as inventories fell 9.3% y/y. The I/S ratio for general merchandise stores also fell to a record low. Wholesalers' ratio also was at the record low while the I/S ratio in the factory sector fell to the lowest level since August 2008.

During the last few months, these depressed ratios reflect little inclination by business to accumulate inventories which have been flat across industries. Notably, the retail and wholesales sectors continue to shed inventories despite higher sales. The factory sector seems to feel the same way despite a modest January uptick in inventory levels.

The business sales and inventory data are available in Haver's USECON database.

Business Inventories (%) January December November Y/Y 2009 2008 2007
Total -0.0 -0.3 0.5 -8.6 -9.8 0.4 4.0
  Retail -0.1 0.2 -0.2 -8.7 -10.6 -3.3 2.5
    Retail excl. Auto -0.2 0.4 -0.3 -4.4 -4.9 -1.9 2.7
  Wholesale -0.2 -1.0 1.6 -9.7 -10.4 2.5 6.2
  Manufacturing 0.2 -0.2 0.2 -7.5 -8.7 2.2 3.7
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