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Economy in Brief

U.S. Business Inventory Increase Remains Firm
by Tom Moeller  July 15, 2014

Total business inventories increased 0.5% in May (5.6% y/y) after an unrevised 0.6% advance during April. The stronger y/y rise contrasted with the 3.0% gain last summer. Inventories in the factory sector rose 0.8% (3.8%). Wholesale inventories continued strong, posting a 0.5% rise (7.9% y/y), and retail inventories edged 0.2% higher (5.7% y/y).

Factory sector inventories gained 0.8% (3.8% y/y) reflecting a 0.9% increase (5.4% y/y) in durables and a 0.6% rise (1.4% y/y) in nondurables. The 0.5% advance in wholesale inventories reflected a 1.0% gain (8.5% y/y) in durables driven by a 1.9% rise (10.4% y/y) in motor vehicles. Machinery inventories also were strong, up 1.1% (13.5% y/y). Lumber inventories increased 1.2% (8.6% y/y). Nondurables inventories fell 0.3% (+6.9% y/y) as farm product inventories were off 3.2% (+5.3% y/y).

Retail inventories edged 0.2% higher (5.7% y/y) after a 0.5% April rise. The increase reflected a 0.6% gain (10.7% y/y) in auto inventories. Nonauto inventories ticked 0.1% higher (3.4% y/y) for the third straight month. Inventories at clothing & accessory stores increased 0.4% (1.8% y/y) and general merchandise store inventories gained 0.3% (3.2% y/y). Elsewhere, inventories fell. Furniture, electronics & appliances inventories declined 0.5% (+3.2% y/y) while food & beverage store inventories were off 0.3% (+2.5% y/y). Building materials inventories declined 0.4% (+2.3% y/y) and furniture & home furnishings inventories fell 0.5% (+3.2% y/y).

The latest inventory gains were accompanied by a firm 0.4% increase (4.6% y/y) in business sales which followed a 0.8% rise during April. Merchant wholesale sales gained 0.7% (6.6% y/y). Retail sales increased a lessened 0.4% (4.4% y/y) and excluding autos sales increased 0.3% (3.1% y/y). Shipments from the factory sector ticked 0.1% higher (2.9% y/y).

The overall inventory-to-sales ratio held steady at 1.29, down a bit from the 1.31 January high. The I/S ratio in the wholesale sector was unchanged at 1.18 but in the factory sector it ticked up to 1.31. In the retail sector, the inventory-to-sales ratio held at a lessened 1.41 while the nonauto retail ratio slipped to 1.22.

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

Manufacturing & Trade (%) May Apr Mar May Y/Y 2013 2012 2011
Business Inventories 0.5 0.6 0.4 5.6 4.3 4.9 7.9
 Retail 0.2 0.5 0.1 5.7 7.1 7.4 3.7
  Retail excl. Motor Vehicles 0.1 0.1 0.1 3.4 3.8 3.2 3.5
 Merchant Wholesalers 0.5 1.0 1.1 7.9 4.0 5.5 9.2
 Manufacturing 0.8 0.5 0.2 3.8 2.3 2.4 10.2
Business Sales (%)
Total 0.4 0.8 1.1 4.6 3.4 4.5 10.9
 Retail 0.4 0.7 1.5 4.1 4.3 5.0 7.7
  Retail excl. Motor Vehicles 0.3 0.7 0.8 3.1 3.0 4.0 7.1
 Merchant Wholesalers 0.7 1.3 1.6 6.6 4.3 4.8 12.4
 Manufacturing 0.1 0.4 0.4 2.9 2.0 4.0 12.1
I/S Ratio
Total 1.29 1.29 1.29 1.28 1.28 1.28 1.26
 Retail 1.41 1.41 1.42 1.40 1.40 1.38 1.36
  Retail Excl. Motor Vehicles 1.22 1.23 1.23 1.22 1.22 1.21 1.23
 Merchant Wholesalers 1.18 1.18 1.18 1.16 1.17 1.18 1.15
 Manufacturing 1.31 1.30 1.30 1.30 1.29 1.29 1.29
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