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Economy in Brief

U.S. Business Inventory Growth Increases but Still Lags Sales
by Tom Moeller  June 11, 2015

Total business inventories increased 0.4% during April (2.6% y/y) following an unrevised 0.1% March uptick. During the last three months, inventory growth picked up to 3.2% (AR) from its January low of 0.1%. Total business sales increased 0.6% (-2.3% y/y), the same as during March. It raised the 3-month change to 3.3% (AR), its best since last July. As a result, the inventory/sales ratio for April held steady at 1.36, just off its expansion high of 1.37.

Inventories in the retail sector jumped 0.8% (3.8% y/y) leaving three-month growth at 6.6%, its quickest since July. General merchandise inventories surged 1.4% (1.5% y/y) and at a 3.6% rate since January. Auto inventories jumped 1.2% (5.9% y/y). Clothing inventories rose 0.9% (6.0% y/y) and at a 10.0% annual rate during the last three months. It was the quickest growth rate in over a year. Furniture inventories declined 0.3% (+0.6% y/y), off in three of the last four months.

Merchant wholesale inventories gained 0.4% (4.5% y/y) in April. The 3.1% rate of growth in the last three months was the slowest since mid-2013. Factory inventories improved 0.1% and by the same amount during the last 12 months. Three- month growth picked up, however, to a slim 0.5%.

The 0.6% rise in business sales (-2.3% y/y) left them rising at a 3.3% annual rate during the last three months, a turnaround from just the prior month. The latest increase reflected a 0.1% uptick (2.0% y/y) in retail spending but more life was apparent in May. Sales excluding motor vehicles slipped marginally (-1/0% y/y) but rose strongly in May. Wholesale sales jumped 1.6% (-3.3% y/y) helping to revive 3-month growth to 2.9%, the first positive reading since September. Factory shipments declined marginally (-3.6% y/y) but rose at a 2.6% rate during the last three months.

The total business inventory-to-sales ratio remained stable m/m but has been trending higher since early 2011. Each of the business sectors participated in the rise. The increase in the wholesale sector ratio to 1.29 is from a low of 1.12 early in 2011. This is nearly the highest since mid-2011. The retail sector realized an I/S ratio 1.46 in April, also nearly the highest since the middle of 2009. The ratio excluding autos displayed similar upward movement. The manufacturing sector I/S ratio is now also at the highest point since 2009.

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

Manufacturing & Trade (%) Apr Mar Feb Apr Y/Y 2014 2013 2012
Business Inventories 0.4 0.1 0.3 2.6 3.8 4.4 5.7
 Retail 0.8 0.3 0.5 3.8 2.7 7.6 7.3
  Retail excl. Motor Vehicles 0.6 0.1 0.5 2.7 2.2 5.0 3.0
 Merchant Wholesalers 0.4 0.2 0.2 4.5 6.7 4.2 6.6
 Manufacturing 0.1 -0.1 0.1 0.1 2.4 1.9 3.8
Business Sales (%)
Total 0.6 0.6 -0.3 -2.3 3.4 3.0 5.0
 Retail 0.1 1.6 -0.6 0.6 3.6 3.9 4.8
  Retail excl. Motor Vehicles -0.0 1.1 -0.2 -1.0 2.5 2.7 3.8
 Merchant Wholesalers 1.6 -0.3 -0.6 -3.3 4.3 3.1 5.9
 Manufacturing -0.0 0.5 0.1 -3.6 2.5 2.1 4.4
I/S Ratio
Total 1.36 1.36 1.37 1.29 1.31 1.29 1.27
 Retail 1.46 1.45 1.47 1.42 1.43 1.41 1.38
  Retail Excl. Motor Vehicles 1.28 1.27 1.28 1.23 1.24 1.23 1.21
 Merchant Wholesalers 1.29 1.30 1.30 1.19 1.20 1.18 1.16
 Manufacturing 1.35 1.34 1.35 1.30 1.31 1.30 1.29
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