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Economy in Brief

Business Inventories Fell as Sales Plunged in April
by Sandy Batten  June 16, 2020

Total business inventories fell 1.3% m/m (-2.2% y/y) in April, following a revised 0.3% m/m decline in March. The April decline was larger than the 0.8% decline expected by the Informa Global Markets panel. Business sales collapsed 14.4% m/m (-18.4% y/y) in April as the widespread lockdown severely restrained activity. This was by a factor of two the largest monthly decline in sales in the history of the series dating back to 1967. Sales had fallen 5.2% m/m in March as the lockdowns generally began in the second half of the month. Even with the decline in inventories, the huge drop in sales led the inventory/sales ratio to jump up to 1.67 in April, its highest reading since February 1983, from 1.45 in March.

Retail inventories led the overall decline in April, falling 3.7% m/m (-3.2% y/y) after a 1.1% m/m rise in March. The decline in retail inventories was widely spread across major categories with an 8.4% m/m drop in motor vehicle inventories the major contributor. Apart from motor vehicle inventories, other inventories fell a more modest 1.1% m/m (-0.9% y/y) in April. Wholesale inventories edged up 0.3% m/m in April, their first increase in eight months. Manufacturing inventories declined 0.4% m/m in April, their fourth consecutive monthly decline.

Sales plunged at all levels in April. Retail store sales dropped 12.7% m/m (-15.3% y/y). But April sales, also reported separately today, showed a 16.8% m/m rebound in May as some states began to reopen their economies. Wholesale sales collapsed 16.9% m/m in April while manufacturing sales fell 13.5% m/m. The April declines in all three sales categories were by far the largest monthly declines in the series histories.

With sales collapsing, inventory-to-sales ratios soared in April notwithstanding the general decline in inventories. The total I/S ratio shot up to 1.67 in April from 1.45 in March. The retail I/S ratio rose to 1.68 in April from 1.53 in March. The wholesale I/S ratio rose jumped up to 1.65 in April, its highest on record dating back to 1980. The manufacturing I/S ratio increased to 1.69 in April, its highest reading since 1991, from 1.46 in March.

The manufacturing and trade data are in Haver's USECON database and the Informa survey information is in MMSAMER.

Manufacturing & Trade Apr Mar Feb Apr Y/Y 2019 2018 2017
Business Inventories (% chg) -1.3 -0.3 -0.4 -2.2 1.9 4.9 3.2
  Retail -3.7 1.1 -0.3 -3.2 1.0 4.6 2.4
    Retail excl. Motor Vehicles -1.1 -0.8 0.0 -0.9 1.9 3.7 2.2
  Merchant Wholesalers 0.3 -1.1 -0.7 -2.8 1.7 6.5 3.0
  Manufacturing -0.4 -1.1 -0.4 -0.6 2.8 3.6 4.2
Business Sales (% chg)
Total -14.4 -5.2 -0.5 -18.4 1.6 5.9 5.3
  Retail -12.7 -5.1 -0.5 -15.3 3.4 4.2 4.6
    Retail excl. Motor Vehicle -12.8 1.0 -0.5 -10.2 3.3 5.1 4.9
  Merchant Wholesalers -16.9 -5.1 -0.7 -20.7 0.6 6.8 6.6
  Manufacturing -13.5 -5.5 -0.4 -18.9 1.0 6.6 4.7
I/S Ratio
Total 1.67 1.45 1.38 1.39 1.39 1.36 1.38
  Retail 1.68 1.53 1.43 1.47 1.46 1.46 1.48
    Retail excl. Motor Vehicles 1.35 1.19 1.21 1.22 1.22 1.22 1.24
  Merchant Wholesalers 1.65 1.37 1.31 1.34 1.34 1.28 1.30
  Manufacturing 1.69 1.46 1.40 1.38 1.38 1.35 1.38
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