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Economy in Brief

U.S. Business Inventories Continue to Decline in June
by Tom Moeller  August 14, 2020

• Business inventories decline for the sixth consecutive month.

• Sales post second straight month of strong increase.

• Inventory-to-sales ratio drifts lower.

Total business inventories fell 1.1% in June (-5.8% y/y) after declining an unrevised 2.3% in May. Total business sales jumped 8.4% (-4.3% y/y), about the same as in May. Sales remained 5.1% below their January peak. The inventory-to-sales (I/S) ratio dropped to 1.37 and returned to near its business cycle low.

Retail inventories fell 2.6% in June (-11.6% y/y). Auto inventories, which comprise roughly 30% of retail inventories, dropped 6.7% (-26.2% y/y). Motor vehicle inventories decreased 6.7% (-26,2% y/y). Non-auto retail inventories eased 0.8% (-3.6% y/y). General merchandise inventories, the second largest sector, declined 2.2% (-8.3% y/y). Department stores, a subset of general merchandise, saw inventories decrease 5.8% (-16.3% y/y). Furniture & appliance inventories declined 3.0% (-13.8% y/y) and apparel inventories were off 4.5% (-7.0% y/y), down sharply for the third straight month. Factory sector inventories gained 0.6% (-0.4% y/y). Wholesale inventories were down 1.4% (-5.6% y/y).

Retail sales increased an upwardly-revised 6.8% in June (5.6% y/y), with non-auto sales growing 6.2% (4.9% y/y). The advance retail sales data for July, released today, indicated a 0.8% sales gain (5.8% y/y). Wholesale sector sales grew 8.8% in June (-8.5% y/y), while shipments from the factory sector were up 9.8% (-9.1% y/y).

The inventory-to-sales ratio in the retail sector fell to a record low of 1.23 in June. (The series dates back to 1967.) The non-auto I/S ratio also collapsed to a record low of 1.12. The wholesale sector I/S ratio declined to 1.38, but has been trending higher since 2010. The factory sector I/S ratio fell to 1.51, the lowest point in three months.

The manufacturing and trade and industrial production data are in Haver's USECON database. Detailed industrial production data can be found in the IP database.

Manufacturing & Trade Jun May Apr Jun Y/Y 2019 2018 2017
Business Inventories (% chg) -1.1 -2.3 -1.4 -5.8 1.9 4.9 3.2
  Retail -2.6 -6.2 -3.8 -11.6 1.0 4.6 2.4
    Retail excl. Motor Vehicles -0.8 -1.6 -1.2 -3.6 1.9 3.7 2.2
  Merchant Wholesalers -1.4 -1.2 0.2 -5.6 1.7 6.5 3.0
  Manufacturing 0.6 0.2 -0.5 -0.4 2.8 3.6 4.2
Business Sales (% chg)
Total 8.4 8.5 -14.4 -4.3 1.6 5.9 5.3
  Retail 6.8 17.3 -12.7 5.6 3.4 4.2 4.6
    Retail excl. Motor Vehicle 6.2 10.5 -12.8 4.9 3.3 5.1 4.9
  Merchant Wholesalers 8.8 5.7 -16.4 -8.5 0.6 6.8 6.7
  Manufacturing 9.8 3.0 -14.0 -9.1 1.0 6.6 4.7
I/S Ratio
Total 1.37 1.50 1.67 1.39 1.39 1.36 1.38
  Retail 1.23 1.35 1.68 1.47 1.46 1.46 1.48
    Retail excl. Motor Vehicles 1.12 1.20 1.35 1.22 1.22 1.22 1.24
  Merchant Wholesalers 1.38 1.53 1.63 1.34 1.34 1.28 1.30
  Manufacturing 1.51 1.65 1.70 1.38 1.38 1.35 1.38
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