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Economy in Brief

U.S. Business Inventories Rise as Expected in March
by Tom Moeller  May 14, 2021

• Size of inventory gain is reduced from earlier two months.

• Business sales surge.

• Inventory-to-sales ratio declines sharply.

Total business inventories rose 0.3% (-0.0% y/y) during March following a 0.6% February rise, revised from 0.5%. Inventories also rose 0.6% in January. Total business sales jumped 5.7% (18.5% y/y) after falling 1.6% in February, revised from -1.9%. Sales surged 4.5% in January.

Retail inventories declined 1.4% (-7.4% y/y) in March following a 0.1% uptick. This decline was due to a 6.1% drop (-27.3% y/y) in motor vehicle inventories, which account for about 30% of total inventories. Excluding motor vehicles, retail inventories rose 0.6% (4.0% y/y). Furniture inventories gained 0.8% (1.3% y/y) and inventories of building materials and garden supplies increased 0.7% (13.1% y/y). Clothing inventories fell 0.5% (-12.9% y/y) while general merchandise inventories also declined 0.5% (+4.1% y/y). Wholesale inventories increased 1.3% (4.5% y/y) in March while factory inventories rose 0.8% (3.0% y/y) for a second straight month.

After weather-related February declines, March sales bounced back in all sectors. Retail sales surged 10.4% (28.2% y/y) after falling 3.0% in February. Nonauto sales strengthened 8.4%. April retail sales were released earlier today. Wholesale sales strengthened 4.6% (19.0 y/y) while factory shipments rose 2.0% (9.5% y/y).

As sales grew faster than inventories, the inventory-to-sales (I/S) ratio fell to a record low of 1.23. (The data date back to December 1980.) The I/S ratio in all three sectors declined. In retail, it fell to a record low of 1.10. Nonauto retail declined to 1.04. The wholesale I/S ratio fell to 1.22 and the factory ratio dropped to 1.49.

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

Manufacturing & Trade Mar Feb Jan Mar Y/Y 2020 2019 2018
Business Inventories (% chg) 0.3 0.6 0.6 -0.0 -2.6 1.6 4.8
  Retail -1.4 0.1 0.2 -7.4 -5.6 0.6 4.4
    Retail excl. Motor Vehicles 0.6 1.4 0.3 4.0 0.8 1.7 3.4
  Merchant Wholesalers 1.3 1.0 1.4 4.5 -1.7 1.4 6.2
  Manufacturing 0.8 0.8 0.1 3.0 -0.5 5.3 2.8
Business Sales (% chg)
Total 5.7 -1.6 4.5 18.5 -2.6 1.2 5.9
  Retail 10.4 -3.0 7.3 28.2 3.1 3.0 4.2
    Retail excl. Motor Vehicle 8.4 -2.8 8.0 18.3 4.0 3.0 5.0
  Merchant Wholesalers 4.6 -0.0 4.4 19.0 -4.6 -0.2 6.7
  Manufacturing 2.0 -1.8 2.0 9.5 -6.7 -2.6 6.0
I/S Ratio
Total 1.23 1.30 1.27 1.46 1.39 1.40 1.36
  Retail  1.10 1.23 1.19 1.52 1.34 1.47 1.46
    Retail excl. Motor Vehicles 1.04 1.12 1.07 1.18 1.15 1.22 1.21
  Merchant Wholesalers 1.22 1.26 1.25 1.39 1.38 1.35 1.28
  Manufacturing 1.49 1.50 1.47 1.40 1.58 1.46 1.37
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