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Economy in Brief

U.S. Business Inventory Growth is Reined In
by Tom Moeller  March 12, 2015

Total business inventories were roughly stable during January (3.4% y/y), the same as they were in December, earlier reported as +0.1%. During the last three months, inventory growth slowed to 0.3% (AR) from its high of 7.6% late in 2013. Total business sales, however, fell 2.0% (-0.3% y/y) for the sixth consecutive monthly shortfall. It lowered the 3-month change to -12.9% (AR) versus +10.2% as of last April. The resulting inventory/sales ratio for January rose to 1.35, its highest level since July 2009.

Inventories in the retail sector were roughly unchanged during January (2.3% y/y). It left three-month growth at 0.5%, well below the double-digit growth at the end of 2013. Auto inventories slipped 0.2% (+3.4% y/y). Clothing inventories increased 0.6% (3.2% y/y) and by 9.2% (AR) since October. Furniture inventories slipped 0.1% (+3.5% y/y) and at a 6.6% rate in the last three months. General merchandise inventories gained 0.2% (-0.2% y/y) and were off at a 0.5% rate since September.

Merchant wholesale inventories gained 0.3% (6.2% y/y) in January. The 4.3% rate of growth in the last three months was below the gains since mid-2013. Factory inventories declined 0.4% (+2.0% y/y). It lowered three-month growth to -3.1%.

The 2.0% decline in business sales (-0.3% y/y) reflected across-the-board weakness that left three-month sales down at a 12.9% rate. Retail spending declined 0.9% (+2.8% y/y). Sales excluding motor vehicles fell 1.3% (+0.4% y/y) and at a 9.1% rate since October. Wholesale sales fell 3.1% (-1.0% y/y) leaving three-month sales falling at a 16.4% rate. Factory shipments declined 2.0% (-2.1% y/y) and at a 14.7% rate during the last three months.

The rise in the total business inventory-to-sales ratio to 1.35 reflected gains in each business sector as inventory growth outpaced sales. The factory sector's rise to 1.36 left the ratio at its highest since early-2009. The same was true for the wholesale sector ratio of 1.27. Any build-up at the retail level has been more controlled as the I/S rise up just moderately of late. The ratio excluding autos, however, rose sharply in the last three months to its highest level since September 2010.

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

Manufacturing & Trade (%) Jan Dec Nov Jan Y/Y 2014 2013 2012
Business Inventories -0.0 -0.0 0.2 3.4 3.8 4.4 4.9
 Retail -0.0 0.5 -0.3 2.3 2.8 7.2 7.4
  Retail excl. Motor Vehicles 0.1 0.0 0.1 1.8 2.3 3.8 3.2
 Merchant Wholesalers 0.3 -0.0 0.8 6.2 6.6 4.3 5.5
 Manufacturing -0.4 -0.4 0.0 2.0 2.5 2.3 2.4
Business Sales (%)
Total -2.0 -1.0 -0.4 -0.3 3.6 3.4 4.5
 Retail -0.9 -1.1 0.4 2.8 3.8 4.3 5.0
  Retail excl. Motor Vehicles -1.3 -1.2 0.1 0.4 2.6 3.0 4.2
 Merchant Wholesalers -3.1 -0.9 -0.4 -1.0 5.1 4.4 4.8
 Manufacturing -2.0 -0.9 -1.0 -2.1 2.3 2.0 4.0
I/S Ratio
Total 1.35 1.33 1.31 1.30 1.30 1.28 1.28
 Retail 1.44 1.43 1.41 1.45 1.42 1.40 1.38
  Retail Excl. Motor Vehicles 1.26 1.24 1.23 1.24 1.23 1.22 1.22
 Merchant Wholesalers 1.27 1.22 1.21 1.18 1.19 1.17 1.18
 Manufacturing 1.36 1.34 1.33 1.30 1.31 1.29 1.29
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