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Economy in Brief

U.S. Business Inventories Increase as Sales Strengthen
by Tom Moeller  January 12, 2018

Total business inventories increased 0.4% in November (3.2% y/y) following no change during the prior two months. Total business sales jumped 1.2% (7.9% y/y), the fourth consecutive month of strong gains. The moderate rise in inventories coupled with sales strength lowered the inventory/sales ratio to 1.33, down sharply from its 1.42 high in April 2016.

Retail inventories ticked 0.1% higher (1.9% y/y) following no change in October. Auto inventories were unchanged (2.2% y/y) following two months of decline. Nonauto retail inventories improved 0.2% (1.7% y/y) after a 0.4% gain. Grocery store inventories increased 0.8% (3.5% y/y) and building materials inventories rose 0.1% (2.7% y/y). Clothing store inventories declined 0.4% (-1.9% y/y) while general merchandise inventories slipped 0.1% (-1.1% y/y). Furniture store inventories dropped 0.5% (+0.9% y/y) following a 0.7% fall. As reported earlier this week, wholesale inventories increased 0.8% in November (4.0% y/y) following a 0.4% decline. Also reported earlier, factory sector inventories increased 0.4% (3.7% y/y) after a 0.3% rise.

Overall business sales surged 1.2% due to strength across business sectors. As reported last month, November retail sales gained 0.9% (6.6% y/y) while nonauto sales jumped 1.5% (6.9% y/y). Wholesale sector sales also strengthened 1.5% (9.8% y/y) as shipments from the factory sector surged 1.2%, strong for the fourth straight month.

The inventory-to-sales ratio in the retail sector eased to 1.42. Sharp declines in recent months left the ratio at its lowest point since September 2014. The nonauto I/S ratio also declined to 1.20, its lowest level since early 2012.  The wholesale sector I/S ratio eased to 1.24, the lowest point in three years. In the manufacturing sector, the I/S ratio slipped to 1.35, also its lowest point in three years.

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

Manufacturing & Trade Nov Oct Sep Nov Y/Y 2016 2015 2014
Business Inventories (% chg) 0.4 0.0 -0.0 3.2 2.3 1.8 3.4
 Retail 0.1 0.0 -0.9 1.9 3.8 4.7 3.0
  Retail excl. Motor Vehicles 0.2 0.4 -0.1 1.7 1.8 3.8 2.6
 Merchant Wholesalers 0.8 -0.4 0.1 4.0 2.5 1.2 5.8
 Manufacturing 0.4 0.3 0.6 3.7 0.8 -0.1 1.6
Business Sales (% chg)
Total 1.2 0.8 1.6 7.9 -0.1 -3.2 2.8
 Retail 0.9 0.7 2.3 6.6 2.6 1.9 4.0
  Retail excl. Motor Vehicles 1.5 0.5 1.6 6.9 2.3 0.4 3.3
 Merchant Wholesalers 1.5 0.8 1.4 9.8 -0.5 -4.9 3.6
 Manufacturing 1.2 0.8 1.1 7.3 -2.0 -5.8 1.3
I/S Ratio
Total 1.33 1.34 1.36 1.40 1.40 1.38 1.31
 Retail 1.42 1.43 1.44 1.48 1.48 1.45 1.43
  Retail excl. Motor Vehicles 1.20 1.21 1.22 1.26 1.27 1.26 1.23
 Merchant Wholesalers 1.24 1.25 1.26 1.31 1.33 1.32 1.21
 Manufacturing 1.35 1.36 1.37 1.40 1.41 1.39 1.31
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