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Economy in Brief

U.S. Business Inventories and Sales Rise in January
by Gerald D. Cohen  April 1, 2019

Total business inventories increased 0.8% (5.3% year-on-year) during January, the second consecutive monthly gain of this magnitude (this report was delayed as a result of the government shutdown). Total business sales rose 0.3% (2.8% y/y), following a 0.9% decrease in December. The inventory-to-sales (I/S) ratio ticked up to 1.39, the fourth consecutive gain. The I/S ratio had declined to 1.33 in mid-2018. Business inventory swings can have a meaningful impact on GDP. In the second and third quarters of 2018 changes in inventories subtracted 1.2 percentage points and then added 2.3 ppt respectively. In Q4, inventories provided just a 0.1 percentage point boost.

Retail inventories increased 0.8% (4.6% y/y) in January after a 1.1% rise. Auto inventories, which comprise roughly 35% of retail inventories, grew 1.2% (9.7% y/y). Non-auto retail inventories rose 0.6% (1.8% y/y). General merchandise inventories, the second largest sector, gained 0.9% (0.5% y/y). The troubled department store sector -- a subset of general merchandise -- saw inventories decline 0.4% (-6.3% y/y); inventories plummeted a record 5.3% in November (data goes back to 1992). As reported the week before last, wholesale inventories grew 1.2% (7.7% y/y). Factory sector inventories rose 0.5% (3.7% y/y).

Retail sales rose an upwardly-revised 0.8% in January (2.6% y/y) with non-auto sales growing 1.6% (3.2% y/y). Note: the advanced retail sales data for February was released today showing a 0.2% decline (+2.1% y/y). Wholesale sector sales increased 0.5% (2.7% y/y), while shipments from the factory sector decreased 0.4% (+3.0% y/y), the fourth consecutive monthly decline.

The inventory-to-sales ratio in the retail sector was unchanged at 1.47 in January. The non-auto I/S ratio ticked down to 1.20, slightly above the historic low of 1.17 reached in November 2018 (data goes back to 1967). The wholesale sector I/S ratio increased to 1.34, its highest level since mid-2016. The manufacturing sector I/S ratio edged up to 1.36.

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

Manufacturing & Trade Jan Dec Nov Jan Y/Y 2018 2017 2016
Business Inventories (% chg) 0.8 0.8 0.0 5.3 5.0 3.4 1.8
 Retail 0.8 1.1 -0.4 4.6 4.2 2.4 4.1
  Retail excl. Motor Vehicles 0.6 1.3 -0.9 1.8 1.2 2.2 1.9
 Merchant Wholesalers 1.2 1.1 0.4 7.7 7.3 3.4 2.2
 Manufacturing 0.5 0.1 -0.1 3.7 3.5 4.5 -0.7
Business Sales (% chg)
Total 0.3 -0.9 -0.6 2.8 6.3 5.8 -0.8
 Retail 0.8 -1.8 0.0 2.6 4.7 5.0 2.5
  Retail excl. Motor Vehicles 1.6 -2.5 0.0 3.2 5.3 5.0 2.0
 Merchant Wholesalers 0.5 -0.9 -1.2 2.7 7.2 7.4 -1.3
 Manufacturing -0.4 -0.2 -0.5 3.0 6.8 5.0 -3.2
I/S Ratio
Total 1.39 1.38 1.36 1.36 1.35 1.38 1.42
 Retail 1.47 1.47 1.43 1.45 1.44 1.47 1.49
  Retail excl. Motor Vehicles 1.20 1.21 1.17 1.22 1.20 1.24 1.28
 Merchant Wholesalers 1.34 1.33 1.30 1.28 1.28 1.29 1.35
 Manufacturing 1.36 1.35 1.35 1.35 1.35 1.37 1.41
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