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Economy in Brief

U.S. Business Inventory Growth Is Trimmed, but Still Outpaces Sales
by Tom Moeller  May 13, 2015

Total business inventories nudged 0.1% higher during March following a 0.2% February rise, earlier reported as 0.3%. During the last three months, inventory growth slowed to 1.1% (AR) from its high of 7.3% late in 2013. Total business sales edged 0.4% higher (-2.1% y/y) following seven consecutive months of decline. It left the 3-month change at -8.2% (AR) versus +11.1% as of last April. As a result, the inventory/sales ratio for March rose to 1.36, its highest level since July 2009.

Inventories in the retail sector gained 0.3% (3.2% y/y) and left three-month growth at 3.1%, still well below the double-digit growth at the end of 2013. Auto inventories increased 0.6% (5.7% y/y). Clothing inventories rose 0.8% (4.5% y/y) and at a 7.1% annual rate during the last three months. Furniture inventories declined 0.5% (+1.6% y/y). General merchandise inventories also fell 0.5% and were down at a 1.0% 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). This lowered three-month growth to -3.1%.

The 0.4% rise in business sales (-2.1% y/y) left sales declining at an 8.2% annual rate during the last three months. The latest increase reflected a 1.2% gain (0.9% y/y) in retail spending. Sales excluding motor vehicles improved 0.6% (-0.6% y/y) but fell at a 3.3% rate since September. Wholesale sales fell 0.2% (-4.0% y/y) leaving three-month sales falling at a 16.3% annual rate. Factory shipments increased 0.5% (-2.8% y/y) but fell at a 5.4% rate during the last three months.

Despite a recent slowdown, inventory growth still outpaced sales. The resulting rise in the total business inventory-to-sales ratio by the end of last quarter reflected gains in each business sector. The increase in the factory sector's I/S ratio to 1.35 left it at the highest level since early-2009. The same was true for the wholesale sector ratio of 1.30. The retail sector realized an I/S ratio 1.46 last quarter, also the highest since the middle of 2009. The ratio excluding autos surged last quarter to the highest level since the middle of 2010.

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

Manufacturing & Trade (%) Mar Feb Jan Mar Y/Y 2014 2013 2012
Business Inventories 0.1 0.2 -0.0 2.9 3.9 4.5 4.9
 Retail 0.3 0.5 -0.0 3.2 2.7 7.6 7.3
  Retail excl. Motor Vehicles 0.1 0.5 0.0 2.0 2.2 5.0 3.0
 Merchant Wholesalers 0.1 0.2 0.4 5.1 6.6 4.3 5.5
 Manufacturing -0.2 0.0 -0.4 0.9 2.5 2.3 2.4
Business Sales (%)
Total 0.4 -0.2 -2.3 -2.1 3.3 2.9 4.9
 Retail 1.2 -0.6 -0.9 0.9 3.6 3.9 4.8
  Retail excl. Motor Vehicles 0.6 -0.2 -1.3 -0.6 2.5 2.7 3.8
 Merchant Wholesalers -0.2 -0.6 -3.6 -4.0 4.3 3.1 5.9
 Manufacturing 0.5 0.4 -2.3 -2.8 2.3 2.0 4.0
I/S Ratio
Total 1.36 1.37 1.36 1.30 1.30 1.28 1.28
 Retail 1.46 1.47 1.45 1.43 1.43 1.41 1.38
  Retail Excl. Motor Vehicles 1.27 1.28 1.27 1.24 1.23 1.22 1.22
 Merchant Wholesalers 1.30 1.30 1.29 1.19 1.20 1.18 1.16
 Manufacturing 1.35 1.35 1.36 1.30 1.31 1.29 1.29
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