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Economy in Brief

Business Inventory Gain Is Strong
by Tom Moeller   September 14, 2010

Inventory management continues to turn towards accumulation. Total business inventories rose 1.0% during July following an upwardly revised 0.5% gain during June, changed from 0.3%. A 0.6% gain had been expected. As mentioned by Haver's Carol Stone last month, recent increases are hardly strong. But that may suggest that more is on the way as long as sales growth remains positive. So far, inventory accumulation has raised the inventory/sales ratio to 1.26 in July, unchanged m/m. Further efforts should come to raise the ratio from the recent all-time low of 1.23.

Recent strong gains in business inventories have been sporadic amongst the factory, wholesale and retail sectors. In each sector, gains amount to roughly 2.5% y/y following near-ten percent declines in 2009. Retail trade gains continue to be paced by motor vehicles where the 2.5% July increase (7.2% y/y) was the third consecutive strong month, Excluding motor vehicles, inventories were unchanged in July and up just 0.5% y/y. For non-auto retail, the inventory-to-sales ratio is up slightly from its low although there's been more of a gain in the furniture area.

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

Business Inventories (%) July June May July Y/Y 2009 2008 2007
Total 1.0 0.5 0.2 2.4 -9.8 0.8 4.0
Retail 0.7 1.1 0.5 2.3 -10.4 -3.3 2.5
  Retail ex Motor Vehicles 0.0 0.1 0.3 0.5 -4.9 -1.9 2.7
Wholesale 1.3 0.3 0.5 2.5 -10.5 3.7 6.4
Manufacturing 1.0 0.1 -0.4 2.5 -8.8 -0.8 7.6
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