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Economy in Brief

U.S. Business Inventories and Sales Decline in February
by Sandy Batten  April 15, 2020

Total business inventories fell 0.4% m/m (-0.1% y/y) in February, in line with expectations, following a downwardly revised 0.3% m/m decline in January. The anticipated figure is from the Informa Global Markets survey. Business sales decreased 0.5% m/m (+1.4% y/y), offsetting a slightly downwardly revised 0.5% m/m gain in January. The similar monthly falls in sales and in inventories in February left the inventory-to-sales ratio unchanged at 1.37, its lowest reading since November 2018.

Retail inventories declined 0.3%m/m (-0.6% y/y) for their fourth consecutive monthly decline. Excluding a 0.8% m/m drop in motor vehicle inventories, the remainder of retail inventories was unchanged in February. Wholesale inventories slumped 0.7% m/m (-1.3% y/y) in February while manufacturing inventories decreased 0.4% m/m (+1.6% y/y).

Sales at retail stores (excluding sales of food services) fell 0.5% m/m in February but this news was eclipsed by the stunning 6.2% m/m collapse reported for March (in a separate report this morning) as the shutdowns generated by the spread of the coronavirus seriously dented consumer spending. Wholesale sector sales slumped 0.8% m/m (+1.1% y/y) in February after a 1.3% m/m jump in January. Shipments from the factory sector declined 0.2% (-1.1% y/y) in February on top of a 0.6% m/m decline in January.

Inventory-to-sales ratios across all sectors were unchanged in February as both sales and inventories declined by roughly equal amounts. The overall I/S ratio remained at 1.37. The retail sector I/S ratio remained at 1.42, the lowest level since November 2014. For merchant wholesalers, the I/S ratio stayed at 1.31, the lowest since November 2018. The factory sector I/S ratio was steady at 1.40, the highest level since November 2016.

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

Manufacturing & Trade Feb Jan Dec Feb Y/Y 2019 2018 2017
Business Inventories (% chg) -0.4 -0.3 0.1 -0.1 2.1 5.1 3.4
  Retail -0.3 -0.1 -0.1 -0.6 1.0 4.5 2.3
    Retail excl. Motor Vehicles 0.0 0.3 0.0 1.1 1.9 1.8 2.0
  Merchant Wholesalers -0.7 -0.6 0.0 -1.3 2.0 7.3 3.3
  Manufacturing -0.4 -0.3 0.4 1.6 3.1 3.5 4.5
Business Sales (% chg)
Total -0.5 0.5 0.0 1.4 1.5 6.1 5.4
  Retail -0.5 0.7 -0.1 4.5 3.4 4.6 4.5
    Retail excl. Motor Vehicle -0.5 0.7 0.4 4.1 3.2 5.3 4.8
  Merchant Wholesalers -0.8 1.3 -0.4 1.1 0.7 6.7 6.7
  Manufacturing -0.2 -0.6 0.5 -1.1 0.7 6.9 5.0
I/S Ratio
Total 1.37 1.37 1.39 1.39 1.40 1.36 1.38
  Retail 1.42 1.42 1.43 1.49 1.45 1.45 1.47
    Retail excl. Motor Vehicles 1.18 1.18 1.18 1.22 1.19 1.20 1.24
  Merchant Wholesalers 1.31 1.31 1.33 1.34 1.35 1.29 1.30
  Manufacturing 1.40 1.40 1.40 1.36 1.38 1.35 1.37
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