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Economy in Brief

U.S. Business Inventories and Sales Growth Slows in February
by Gerald D. Cohen  April 18, 2019

Total business inventories increased 0.3% (4.9% year-on-year) during February, after a slightly upwardly-revised 0.9% gain in January. Total business sales edged up 0.1% (2.4% y/y) following a 0.3% rise. The inventory-to-sales (I/S) ratio stood at 1.39 for the third consecutive month. 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 0.3% (4.3% y/y) in February after a 0.8% gain. Auto inventories, which comprise roughly 35% of retail inventories, grew 0.3% (8.6% y/y) Non-auto retail inventories rose 0.4% (1.9% y/y). General merchandise inventories, the second largest sector, declined 0.2% both for February and from a year ago. The troubled department store sector – a subset of general merchandise – saw inventories down 0.3% (-6.2% y/y); inventories plummeted a record 5.3% in November 2018 (data goes back to 1992) and have not recovered. Factory sector inventories gained 0.3% (3.6% y/y). As reported yesterday, wholesale inventories were up 0.2% (6.9% y/y).

Retail sales declined a downwardly-revised 0.3% in February (+1.9% y/y) with non-auto sales also down 0.3% (+2.0% y/y). Note: the advanced retail sales data for March was released today showing a 1.7% jump (3.5% y/y). Wholesale sector sales increased 0.3% (2.1% y/y), while shipments from the factory sector rose 0.4% (3.3% y/y) after four consecutive monthly declines.

The inventory-to-sales ratio in the retail sector edged up to 1.48 in February. The non-auto I/S ratio ticked up to 1.21 slightly above the historic low of 1.17 reached in November 2018 (data goes back to 1967). The wholesale and factory sector I/S ratios were unchanged at 1.35 and 1.36 respectively.

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

Manufacturing & Trade Feb Jan Dec Feb Y/Y 2018 2017 2016
Business Inventories (% chg) 0.3 0.9 0.8 4.9 4.9 3.4 1.7
 Retail 0.3 0.8 1.1 4.3 4.2 2.4 4.1
  Retail excl. Motor Vehicles 0.4 0.7 1.3 1.9 1.2 2.2 1.9
 Merchant Wholesalers 0.2 1.2 1.1 6.9 7.1 3.3 1.9
 Manufacturing 0.3 0.5 0.1 3.6 3.5 4.5 -0.7
Business Sales (% chg)
Total 0.1 0.3 -0.9 2.4 6.1 5.6 -0.8
 Retail -0.3 0.8 -1.8 1.9 4.7 5.0 2.5
  Retail excl. Motor Vehicles -0.3 1.6 -2.5 2.0 5.4 5.0 2.0
 Merchant Wholesalers 0.3 0.5 -0.7 2.1 6.6 6.7 -1.3
 Manufacturing 0.4 -0.3 -0.2 3.3 6.8 5.0 -3.2
I/S Ratio
Total 1.39 1.39 1.39 1.36 1.36 1.38 1.42
 Retail 1.48 1.47 1.47 1.45 1.44 1.47 1.49
  Retail excl. Motor Vehicles 1.21 1.20 1.21 1.21 1.20 1.24 1.28
 Merchant Wholesalers 1.35 1.35 1.34 1.29 1.29 1.30 1.35
 Manufacturing 1.36 1.36 1.35 1.36 1.35 1.37 1.41
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