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Economy in Brief

U.S. Business Inventory Accumulation Recovers
by Tom Moeller  February 15, 2011

The rate of business inventory accumulation picked back up in December. The 0.8% gain was double the 0.4% November increase, revised from 0.2%. During the last three months, inventories rose at an 8.0% annual rate versus the Q3 peak of 14.0%. Recent inventory accumulation certainly was voluntary since it accompanied a 1.1% increase (8.7% y/y) in business sales. In Q4, sales rose at a 17.1% annual rate. Despite all the inventory accumulation, the inventory-to-sales ratio remained at 1.25, just slightly below where it was before the recent recession began. That represents a significant correction after the unwanted surge during the economic downturn.

A quicker rate of inventory accumulation was broad-based at yearend. Retail inventories rose 0.4% in December and recovered weakness in the prior two months. Furniture (5.4% y/y), general merchandise (+4.8% y/y) and apparel (2.7% y/y) inventory accumulation each accelerated. Accumulation of auto inventories slowed for the quarter but for the year picked up to 13.1%, the strongest since 2002. Less autos, inventories increased 3.3% y/y after two years of decline. Nevertheless, strict inventory management left the retail I/S ratio near its all-time low.

In the wholesale sector, inventories jumped 1.0% in December, helped by a 1.2% increase in petroleum (14.1% y/y) with higher prices. Nevertheless, wholesale inventories less petroleum jumped 1.0% and rose a strong 10.4% y/y. In the factory sector, inventories jumped another 1.1% (7.9% 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.

Business Inventories (%) Dec Nov Oct Dec Y/Y 2010 2009 2008
Total 0.8 0.4 0.8 8.0 8.0 -9.9 0.8
 Retail 0.4 0.0 -0.6 5.9 5.9 -10.4 -3.3
   Retail ex Motor Vehicles 0.7 0.4 -0.2 3.3 3.3 -4.8 -1.9
 Wholesale 1.0 -0.0 1.7 10.5 10.5 -10.8 3.7
 Manufacturing 1.1 0.9 1.1 7.9 7.9 -8.8 -0.8
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