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Economy in Brief

U.S. Business Inventories Rise Moderately; Sales Strengthen
by Tom Moeller  July 16, 2018

Total business inventories increased 0.4% (4.4% y/y) during May following a 0.3% April increase. Total business sales strengthened 1.4% (8.6% y/y), following a 0.6% gain. The inventory-to-sales ratio slipped to 1.34. It peaked early in 2016 at 1.43.

Retail inventories increased 0.4% (2.2% y/y) in May, the same as during April. Auto inventories grew 0.9% (1.9% y/y) after a 0.8% rise. Non-auto retail inventories edged 0.1% higher (2.4% y/y) following a 0.2% increase. General merchandise inventories rose 0.3% (0.9% y/y) after a 1.0% surge. In the department store sector, inventories edged 0.2% higher (-3.2% y/y) following a 0.7% rise. Building materials inventories gained 0.7% (6.1% y/y) after a 0.6% increase, while clothing store inventories fell 0.7% (-0.8% y/y), down for the third straight month. Inventories of furniture, electronics and appliances declined 0.9% (-0.7% y/y), the fourth decline this year. As reported last week, wholesale inventories increased 0.6% (5.9% y/y) following a 0.1% uptick. Factory sector inventories rose 0.2% (5.2% y/y) following a 0.4% gain.

Retail sales increased 1.1% in May (6.5% y/y) with non-auto sales up 1.2% (7.1% y/y) after a 0.5% rise. Wholesale sector sales increased 2.5% (11.8% y/y) after improving 1.4%. Shipments from the factory sector rose 0.6% (7.3% y/y) following a 0.1% uptick.

The inventory-to-sales (I/S) ratio in the retail sector slipped to 1.43 in May, down sharply from the levels averaged during the prior two years. The non-auto I/S ratio declined to 1.20, its lowest level since early-2012. The ratio peaked at 1.29 early in 2016. The wholesale sector I/S ratio fell sharply to 1.24, its lowest level since November 2014. The manufacturing sector I/S ratio held steady for the third month at 1.35, its lowest point in three years.

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

Manufacturing & Trade May Apr Mar May Y/Y 2017 2016 2015
Business Inventories (% chg) 0.4 0.3 -0.1 4.4 3.5 1.8 1.7
 Retail 0.4 0.4 -0.7 2.2 2.4 4.1 4.9
  Retail excl. Motor Vehicles 0.1 0.2 -0.6 2.4 2.3 1.9 3.9
 Merchant Wholesalers 0.6 0.1 0.2 5.9 3.6 2.2 1.2
 Manufacturing 0.2 0.4 0.2 5.2 4.5 -0.7 -0.8
Business Sales (% chg)
Total 1.4 0.6 0.6 8.6 5.8 -0.8 -3.4
 Retail 1.1 0.4 0.7 6.5 4.9 2.5 1.9
  Retail excl. Motor Vehicles 1.2 0.5 0.3 7.1 4.9 2.0 0.4
 Merchant Wholesalers 2.5 1.4 0.4 11.8 7.4 -1.3 -4.9
 Manufacturing 0.6 0.1 0.7 7.3 5.0 -3.2 -6.2
I/S Ratio
Total 1.34 1.35 1.35 1.39 1.38 1.42 1.39
 Retail 1.43 1.44 1.44 1.49 1.47 1.49 1.46
  Retail excl. Motor Vehicles 1.20 1.21 1.21 1.25 1.24 1.28 1.27
 Merchant Wholesalers 1.24 1.27 1.29 1.31 1.29 1.35 1.33
 Manufacturing 1.35 1.35 1.35 1.37 1.37 1.41 1.39
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