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Economy in Brief

U.S. Business Inventory Accumulation Slows
by Tom Moeller  January 17, 2011

After several months of strong gain, the rate of business inventory accumulation slowed to 0.2% in November after a 0.8% October increase, initially reported at 0.7%. During the last three months inventories rose at a 9.5% annual rate versus the recent peak of 14.0%. Recent inventory accumulation certainly was voluntary since it accompanied a 1.2% increase (8.5% y/y) in business sales. However, the sales gain also has slowed recently. Despite all the inventory accumulation, the inventory-to-sales ratio at 1.25 was just slightly below where it was before the recession began. That represents a significant correction after the unwanted surge during the economic downturn.

The picture of quicker inventory accumulation is hardly broad-based. Retail inventories in fact fell slightly in November led by a 0.8% drop (+13.7% y/y) in motor vehicles. Less autos, inventories increased 0.2% and during the last three months rose at a 1.7% rate versus the May peak of 7.5%. Strict management of inventories dropped the retail nonauto I/S ratio to an all-time low. During November, a 1.2% jump (4.5% y/y) in furniture was accompanied by a 0.1% increase in general merchandise (4.0% y/y). Apparel inventories slipped 0.3% (+0.8% y/y).

In the wholesale sector, inventories fell 0.2% despite a 0.2% increase in petroleum (18.4% y/y) with higher prices. Less petroleum, wholesale inventories slipped 0.2% during November but rose 7.9% y/y. In the factory sector, inventories jumped another 0.8% (6.6% y/y) following the 8.8% decumulation during 2009.

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.

Monetary Policy and the Role of Dissent is from the Federal Reserve Bank of Kansas City and it can be found here.

Business Inventories (%) Nov Oct Sept Year Ago 2009 2008 2007
Total 0.2 0.8 1.3 6.8 -9.8 0.8 4.0
 Retail -0.0 -0.6 0.8 5.7 -10.4 -3.3 2.5
   Retail ex Motor Vehicles 0.2 -0.2 0.4 2.9 -4.9 -1.9 2.7
 Wholesale -0.2 1.7 2.1 8.4 -10.5 3.7 6.4
 Manufacturing 0.8 1.1 1.1 6.6 -8.8 -0.8 7.6
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