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Economy in Brief

Business Inventories Expand, Continuing Realignment with Growing Sales
by Carol Stone   October 15, 2010

Businesses continued to add inventories in August, and the inventory/sales ratio made it to 1.27, the highest since November 2009. Total stocks were up 0.6% in August, following July's 1.1% gain. This sum of manufacturers, wholesalers and retailers stocks was up 4.7% from a year ago. However, that perhaps can be seen as something of an exaggeration, since last August saw the "cash-for-clunkers" reductions in vehicle inventories. At the same time, excluding the motor vehicle inventories at both retail and wholesale, the total remainder shows stocks are still up 3.4% from their year-earlier level.

By stage of distribution, manufacturers' stocks were little changed in August, edging up just 0.1% after July's slightly revised 0.9% increase (originally 1.0%). Wholesalers, though, had an 0.8% gain in August after an upwardly revised 1.5% in July (originally 1.3%). Retailers added 1.0% to their stocks in August after 1.0% in July and 1.1% in June. Excluding motor vehicle dealers, other retailers' inventories were up just 0.2% as sales at those stores gained 1.0%, this restrained the growth of inventory perhaps to less than managers would intend. Thus, as Tom Moeller pointed out here last month, more inventory gains could be in prospect in subsequent reports, as merchants work to get the relationship of inventories to sales back up from its recent historic lows.

The business sales and inventory data are available in Haver's USECON database. Note that in a value-added feature, the database includes series calculated by Haver database managers showing sales, inventories and I/S ratios for total business less motor vehicle dealers and related wholesale operations.

Business Inventories (%) August July June August
Y/Y
2009 2008 2007
Total 0.6 1.1 0.5 4.7 -9.8 0.8 4.0
Retail 1.0 1.0 1.1 6.1 -10.4 -3.3 2.5
 Retail ex Motor Vehicles 0.2 0.1 0.1 1.3 -4.9 -1.9 2.7
Wholesale 0.8 1.5 0.3 5.0 -10.5 3.7 6.4
Manufacturing 0.1 0.9 0.1 3.3 -8.8 -0.8 7.6
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