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Economy in Brief

U.S. Business Inventories Rise Last Quarter Led by Retail
by Tom Moeller  February 13, 2014

Total business inventories increased 0.5% in December (4.0% y/y) after a 0.4% November gain. Though the rate of inventory accumulation slowed late in the quarter, the entire quarter's gain of 1.7% was the swiftest since Q3 2013. This inventory rise accompanied a slim 0.1% gain (3.8% y/y) in business sales after November's 0.7% increase. As a result, the inventory-to-sales ratio rose to 1.30, up from the steady 1.29 of the prior seven months.

In the retail sector, inventories advanced 0.6% (7.3% y/y) in December. The 2.6% rise during the quarter was the swiftest since Q3 2010. Motor vehicle inventories led the December gain with a 1.3% rise (14.3% y/y) and were up 5.7% in Q4, the quickest gain since Q2 2010. Inventories excluding autos rose 0.2% (4.2% y/y) and the Q/Q rise was firm at 1.1%. Inventories of furniture, electronics and appliances rose 0.5% (-0.5% y/y) and the quarterly gain of 1.6% was the strongest since Q2 2010. It raised the I/S ratio to its highest level since February. Clothing inventories also rose a firm 1.0% (2.9% y/y) in December and the 1.4% quarterly rise was the swiftest since Q2 2012. The I/S ratio remained, however, low. General merchandise stores' inventories appear to be under greater control. The 0.1% dip (+4.4% y/y) in December left the quarterly rise at a modest 0.5% though the I/S ratio still remained up from a year ago.

Overall, it looks like merchant wholesale inventories kept their inventories under control. The 0.3% rise (4.0% y/y) in inventories left the I/S ratio at 1.17, its lowest level since November 2010. Nondurable goods distributors inventories fell 1.3% (+1.3% y/y), led lower by a 5.1% drop (-11.5% y/y) in petroleum. Inventories excluding petroleum, however, fell a lesser 0.8%, and were up 3.1% y/y. Durable wholesale inventories gained 1.3% (5.7% y/y). That left the I/S ratio at a roughly stable 1.58. Factory sector inventories increased 0.5% (2.3% y/y) but the I/S ratio held at a low 1.29.

Business sales lost forward momentum in December and ticked up just 0.1% (3.8% y/y). For the quarter, however, sales rose a firm 1.3%, constant with the Q3 rise.  Retail sales were roughly unchanged (3.7% y/y) in December. Wholesale sales improved 0.5% and by a steady 5.8% y/y. Shipments from the factory sector fell 0.2% in December (+2.1% y/y).

The manufacturing and trade data are in Haver's USECON database.

Business Inventories (%) Dec Nov Oct Dec Y/Y 2013 2012 2011
Total 0.5 0.4 0.8 4.4 4.4 5.1 7.9
 Retail 0.6 0.8 1.1 7.3 7.3 8.0 3.9
  Retail excl. Motor Vehicles 0.2 0.6 0.3 4.2 4.2 3.2 3.6
 Merchant Wholesalers 0.3 0.5 1.3 4.0 4.0 5.5 9.2
 Manufacturing 0.5 0.1 0.0 2.3 2.3 2.4 10.2
Business Sales (%)
Total 0.1 0.7 0.5 3.8 3.4 4.4 11.0
 Retail -0.0 0.2 0.4 2.6 4.3 5.1 7.7
  Retail excl. Motor Vehicles 0.3 -0.2 0.4 3.0 3.3 4.8 7.0
 Merchant Wholesalers 0.5 1.0 1.1 5.8 4.3 4.3 12.8
 Manufacturing -0.2 0.8 0.1 2.1 2.1 4.0 12.1
I/S Ratio
Total 1.30 1.29 1.29 1.29 1.29 1.29 1.27
 Retail 1.45 1.44 1.43 1.40 1.41 1.38 1.36
  Retail Excl. Motor Vehicles 1.23 1.23 1.22 1.21 1.22 1.21 1.23
 Merchant Wholesalers 1.17 1.17 1.18 1.19 1.19 1.19 1.17
 Manufacturing 1.29 1.28 1.29 1.29 1.29 1.29 1.29
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