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Economy in Brief

U.S. Business Inventories Rose and Sales Rebounded in June
by Sandy Batten  August 17, 2021

• June gain in inventories largest in eight months.

• Sales rebounded, led by retail, and outpaced rise in inventories.

• With sales outpacing inventories, inventory-to-sales ratios edged lower to multi-year lows.

Total business inventories increased 0.8% m/m (6.6% y/y) in June, up from an upwardly revised 0.6% m/m increase in May (initially reported as 0.5%). This was the largest monthly gain in eight months and in line with expectations in the Informa Global Markets Survey. Business sales rebounded, rising 1.4% m/m (19.9% y/y) more than reversing an upwardly revised 0.2% monthly decline in May (originally -0.3%). With the rise in sales outpacing the rise in inventories, the inventory to sales ratio (I/S) edged down to 1.25 in June from 1.26 in May. Along with the 1.25 reading in April this was the lowest level since February 2012.

Wholesale inventories increased 1.1% m/m (10.5% y/y) in June, a little slower than the 1.3% m/m rise in May, but still the sixth consecutive month in which the monthly increase has been 1% or more. Factory inventories rose 1.0% m/m (5.5% y/y) in June following an upwardly revised 1.1% m/m increase in May (originally 0.9%). Retail inventories rose a more modest 0.3% m/m (3.5% y/y), the first monthly increase after three consecutive declines. Retail inventories continued to be restrained by falling motor vehicle inventories, which fell 0.3% m/m in June for their sixth consecutive monthly decline. Food and beverage inventories declined 0.3% m/m in June on top of a 0.1% m/m fall in May. Clothing inventories also fell 0.3% m/m in June, their fourth decline in the past five months. By contrast, furniture inventories increased 0.6% m/m and building materials inventories jumped up 1.8% m/m.

The rebound in business sales in June reflected a rebound in retail sales, which rose 0.5% m/m in June following a 2.0% m/m drop in May. However, in a separate report this morning, retail sales declined 1.1% m/m in July. The June rebound in retail sales was led by a 1.4% m/m increase in sales excluding sales of motor vehicles after a 1.2% m/m decline in May. Furniture sales increased 0.5% m/m in June after a 2.3% m/m fall in May. Clothing sales rose 3.7% m/m in June on top of a 3.8% m/m gain in May. Wholesale sales rose a strong 2.0% m/m (27.5% y/y) in June while manufacturing shipments posted a 1.6% m/m (15.5% y/y) gain.

With the rise in sales outpacing inventories in June, the I/S ratio edged down to 1.25 in June, tying April for the lowest reading since February 2012. The overall retail I/S ratio was unchanged at 1.08 in June, but after excluding motor vehicles, it fell to 1.06 from 1.07. The I/S ratio in wholesale trade edged down to 1.22 in June from 1.23 in May and for manufacturing it slipped to 1.48 from 1.49.

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

Manufacturing & Trade Jun May Apr Jun Y/Y 2020 2019 2018
Business Inventories (% chg) 0.8 0.6 0.1 6.6 -2.6 2.4 4.5
  Retail 0.3 -0.9 -1.7 3.5 -5.6 0.6 4.4
    Retail excl. Motor Vehicles 0.5 0.8 0.7 10.6 0.8 1.7 3.4
  Merchant Wholesalers 1.1 1.3 1.1 10.5 -1.7 1.4 6.2
  Manufacturing 1.0 1.1 0.5 5.5 -0.5 5.3 2.8
Business Sales (% chg)
Total 1.4 -0.2 0.6 19.9 -2.9 0.0 5.7
  Retail 0.5 -2.0 0.4 16.4 3.1 3.0 4.2
    Retail excl. Motor Vehicle 1.4 -1.2 -0.8 15.5 4.0 3.0 5.0
  Merchant Wholesalers 2.0 0.8 1.1 27.5 -4.8 -0.2 6.7
  Manufacturing 1.6 0.9 0.2 15.5 -6.7 -2.6 6.0
I/S Ratio
Total 1.25 1.26 1.25 1.41 1.43 1.42 1.36
  Retail 1.08 1.08 1.07 1.22 1.34 1.47 1.46
    Retail excl. Motor Vehicles 1.06 1.07 1.05 1.10 1.15 1.22 1.21
  Merchant Wholesalers 1.22 1.23 1.22 1.41 1.38 1.35 1.28
  Manufacturing 1.48 1.49 1.49 1.63 1.58 1.46 1.37
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