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Economy in Brief

U.S. Business Inventories and Sales Posted Sharp Increases in October
by Sandy Batten  December 15, 2021

• Inventories rose 1.2% m/m while sales jumped 2.1% m/m.

• Inventories monthly increase largest since 2011.

• Sales monthly increase largest since May.

• Inventory to sales ratio falls to lowest since 2011.

Total business inventories increased 1.2% m/m (7.8% y/y) in October on top of 0.8% monthly gains in both September and August. The Informa Global Markets Survey had looked for a 0.9% m/m increase in October. The October monthly increase in inventories was the largest since May 2011. Business sales jumped up 2.1% m/m (16.7% y/y) in October, their largest monthly gain since March, following a solid 1.2% m/m rise in September. With the rise in sales outpacing the gain in inventories, the inventory-to-sales ratio fell to 1.24 in October, the lowest reading since March 2011, from 1.26 in September.

By sector, wholesale inventories led the increase in total inventories, rising 2.3% m/m (14.4% y/y) in October on top of a 1.4% m/m increase in September and a 1.3% m/m gain in August. Retail inventories edged up 0.1% m/m (-0.7% y/y), just offsetting their 0.1% m/m decline in September. However, retail inventories continue to be restrained by weak motor vehicle inventories, which fell 1.0% m/m in October on top of a 3.0% m/m drop in September. Retail inventories excluding motor vehicles rose 0.5% m/m in October and 0.8% m/m in September with clothing inventories posting a solid 1.6% m/m gain in October. Factory inventories increased 0.8% m/m (9.0% y/y) in October after a 1.0% m/m rise in September.

Sales gains were strong across all sectors. Retail sales were up 2.0% m/m (14.7% y/y) in September and excluding motor vehicles were up 2.1% m/m (15.6% y/y). (Note: in a separate release this morning, retail sales rose a less-than-expected 0.3% m/m in November.) Wholesale sales rose 2.2% m/m (22.2% y/y) on top of a 1.7% monthly gain in September. And factory shipments increased 2.0% m/m (13.0% y/y) versus a 1.0% m/m gain in September.

With the gain in overall sales outpacing the rise in inventories, the overall inventory/sales ratio fell to 1.24 in October, the lowest since March 2011, from 1.26 in September. The retail I/S ratio declined to 1.07 in October, tying its record low reached in April, from 1.09 in September. The wholesale I/S ratio was unchanged at 1.22 while the manufacturing I/S ratio fell to 1.46, its lowest since June 2019, from 1.48.

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

Manufacturing & Trade Oct Sep Aug Oct Y/Y 2020 2019 2018
Business Inventories (% chg) 1.2 0.8 0.8 7.8 -2.6 2.4 4.5
  Retail 0.1 -0.1 0.2 -0.7 -5.6 0.6 4.4
    Retail excl. Motor Vehicles 0.5 0.8 0.7 9.3 0.8 1.7 3.4
  Merchant Wholesalers 2.3 1.4 1.3 14.4 -1.7 1.4 6.2
  Manufacturing 0.8 1.0 0.7 9.0 -0.5 5.3 2.8
Business Sales (% chg)
Total 2.1 1.2 0.1 16.7 -3.0 0.0 5.7
  Retail 2.0 0.7 1.3 14.7 3.1 3.0 4.2
    Retail excl. Motor Vehicle 2.1 0.6 2.5 15.6 3.9 3.0 5.0
  Merchant Wholesalers 2.2 1.7 -0.9 22.2 -4.9 -0.2 6.7
  Manufacturing 2.0 1.0 0.1 13.0 -6.7 -2.6 6.0
I/S Ratio
Total 1.24 1.26 1.26 1.35 1.43 1.42 1.36
  Retail 1.07 1.09 1.10 1.23 1.34 1.47 1.46
    Retail excl. Motor Vehicles 1.05 1.06 1.06 1.11 1.15 1.22 1.21
  Merchant Wholesalers 1.22 1.22 1.23 1.31 1.38 1.35 1.28
  Manufacturing 1.46 1.48 1.48 1.51 1.58 1.46 1.37
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