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Economy in Brief

U.S. Business Inventory Accumulation Quickens in May
by Tom Moeller  July 16, 2021

• Inventory increases are broad-based.

• Sales slip concentrated in retail.

• Inventory-to-sales ratio edges higher.

Total business inventories increased 0.5% (4.5% y/y) during May after edging 0.1% higher in April, revised from -0.2%. It was the largest increase in three months. The gain matched expectations in the Informa Global Markets Survey. Business sales overall eased 0.3% (+28.7% y/y) following a 0.6% rise. The total inventory-to-sales (I/S) ratio edged up to 1.26 after falling to 1.25 in April, which was the lowest level since February 2012.

Wholesale inventories increased 1.3% in May (8.2% y/y), the fifth consecutive month of strength, while factory inventories rose 0.9% (4.8% y/y) for the fourth straight month of strong increase. Retail inventories declined sharply during the past three months. The 0.8% drop (+0.2% y/y) in May followed a 1.7% decline in April. These declines continue to be entirely due to the 18.0% three-month fall in motor vehicle inventories. Excluding motor vehicles, retail inventories rose 0.9% in May (9.1% y/y) after two consecutive 0.7% gains. Furniture & appliance inventories gained 0.8% (13.8% y/y) and inventories of building materials & garden supplies increased 2.3% (23.1% y/y). Clothing inventories slipped 0.2% (-6.8% y/y) and general merchandise inventories rose 0.8% (12.5% y/y).

The decline in May business sales wholly reflected a 2.4% drop (+23.5% y/y) in retail sales after a 0.4% rise in April. Nonauto retail sales fell 1.6% (+20.5% y/y) following a 0.8% drop. Wholesale sales strengthened 0.8% (36.8% y/y) while manufacturing  shipments rose 0.7% (25.8% y/y).

The rise in the I/S ratio overall during May reflected a gain in the retail sector to 1.09 from a record low of 1.07 in April. The nonauto retail I/S ratio rose to 1.07 from a record low of 1.05. The I/S ratio in wholesale trade edged up to 1.23 and in manufacturing it held at 1.49.

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

Manufacturing & Trade May Apr Mar May Y/Y 2020 2019 2018
Business Inventories (% chg) 0.5 0.1 0.2 4.5 -2.6 2.4 4.5
  Retail -0.8 -1.7 -1.4 0.2 -5.6 0.6 4.4
    Retail excl. Motor Vehicles 0.9 0.7 0.7 9.1 0.8 1.7 3.4
  Merchant Wholesalers 1.3 1.1 1.2 8.2 -1.7 1.4 6.2
  Manufacturing 0.9 0.5 0.8 4.8 -0.5 5.3 2.8
Business Sales (% chg)
Total -0.3 0.6 5.8 28.7 -2.9 0.0 5.7
  Retail -2.4 0.4 11.0 23.5 3.1 3.0 4.2
    Retail excl. Motor Vehicle -1.6 -0.8 9.2 20.5 4.0 3.0 5.0
  Merchant Wholesalers 0.8 1.1 4.3 36.8 -4.7 -0.2 6.7
  Manufacturing 0.7 0.2 2.1 25.8 -6.7 -2.6 6.0
I/S Ratio
Total 1.26 1.25 1.26 1.55 1.43 1.42 1.36
  Retail 1.09 1.07 1.10 1.34 1.34 1.47 1.46
    Retail excl. Motor Vehicles 1.07 1.05 1.03 1.18 1.15 1.22 1.21
  Merchant Wholesalers 1.23 1.22 1.22 1.56 1.38 1.35 1.28
  Manufacturing 1.49 1.49 1.48 1.79 1.58 1.46 1.37
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