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Economy in Brief

U.S. Business Inventories Decrease Slightly as Sales Show Moderate Advance
by Carol Stone, CBE  December 14, 2017

Total business inventories decreased 0.1% in October (3.5% y/y) after being basically flat in September; the September total was revised downward ever so slightly from its initial report. Total sales at retailers, wholesalers and manufacturers gained 0.6% (6.5% y/y), moderating after September's 1.6% surge, which was revised from 1.4% reported initially. The decline in inventories and the rise in sales put the inventory/sales ratio at 1.35, down from 1.36 in September and 1.39 in October 2016. This latest I/S ratio is the lowest since December 2014.

By distribution sector, inventories at retailers were flat in October (up 2.7% y/y), following their 0.9% decrease in September. Motor vehicle and parts dealers' stocks fell 0.7% (+3.9% y/y). Excluding that large motor vehicle segment - 35.6% of total retail inventories so far this year - other retailers' inventories rose 0.4% in October (2.1% y/y). The largest October increase was at building materials, garden equipment & supplies stores, 0.6% (3.8% y/y). Food & beverage stores had a 0.4% rise (2.9% y/y), general merchandise stores, 0.2% (-1.1% y/y) and clothing and accessories stores, 0.1% (-0.7% y/y). Inventories at furniture & appliance stores declined 0.6% in October (+1.7% y/y). At other distribution sectors, inventories at merchant wholesalers fell 0.5% (+3.9% y/y) in October after edging up 0.1% in September; those at manufacturers rose 0.2% (3.8% y/y) following September's 0.6% increase.

On the sales front, as described elsewhere on Haver.com today, retailers' sales in October gained 0.6% (+5.2% y/y); excluding the motor vehicle sector, they rose 0.4% (+5.0% y/y). Wholesale sales advanced 0.7% (+8.4% y/y) and manufacturers' shipments increased 0.6% (+5.8% y/y).

The lower inventory/sales ratio for total business In October was mirrored in the retail and wholesale sectors; that in manufacturing was flat. For retailers, the ratio edged down to 1.43 in October from 1.44 in September; it had been 1.47 in October 2016. Excluding motor vehicle dealers, the ratio was unchanged at 1.22 in the month and compared to 1.27 a year ago. For motor vehicle dealers specifically, the ratio dropped to 2.13 from 2.17 in September; it had the same 2.17 reading in October 2016. Furniture & appliance stores also saw a sizable drop, to 1.52 in October from 1.56 the month before and 1.57 the year before. The ratio in clothing stores was 2.37, down from 2.39 in September and 2.44 in the year-ago month. For wholesalers, the ratio was 1.25 in October, modestly lower than September's 1.26, with a more noticeable decrease from the year-ago 1.30. Manufacturers' inventory/sales ratio was 1.37, the same as September's 1.37 and modestly lower than 1.39 a year ago.

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

Manufacturing & Trade Oct Sep Aug Oct Y/Y 2016 2015 2014
Business Inventories (% chg) -0.1 -0.0 0.6 3.5 2.3 1.8 3.4
 Retail 0.0 -0.9 0.6 2.7 3.8 4.7 3.0
  Retail excl. Motor Vehicles 0.4 -0.1 0.3 2.1 1.8 3.8 2.6
 Merchant Wholesalers -0.5 0.1 0.8 3.9 2.5 1.2 5.8
 Manufacturing 0.2 0.6 0.6 3.8 0.8 -0.1 1.6
Business Sales (% chg)
Total 0.6 1.6 0.8 6.5 -0.1 -3.2 2.8
 Retail 0.6 2.3 -0.1 5.2 2.7 1.9 4.0
  Retail excl. Motor Vehicles 0.4 1.6 0.5 5.0 2.3 0.4 3.3
 Merchant Wholesalers 0.7 1.4 1.9 8.4 -0.5 -4.9 3.6
 Manufacturing 0.6 1.1 0.6 5.8 -2.0 -5.8 1.3
I/S Ratio
Total 1.35 1.36 1.38 1.39 1.40 1.38 1.31
 Retail 1.43 1.44 1.49 1.47 1.48 1.45 1.43
  Retail excl. Motor Vehicles 1.22 1.22 1.24 1.27 1.27 1.26 1.23
 Merchant Wholesalers 1.25 1.26 1.28 1.30 1.33 1.32 1.21
 Manufacturing 1.37 1.37 1.38 1.39 1.41 1.39 1.31
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