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Economy in Brief

U.S. Business Inventories Build as Sales Decline in July
by Tom Moeller  September 16, 2022

• Inventories increase across business sectors.

• Sales decline is broad-based.

• Inventory-to-sales ratio is highest in nearly two years.

Total business inventories rose 0.6% (18.4% y/y) in July following an unrevised 1.4% jump during June. A 0.8% gain had been expected in the Informa Global Markets Survey. Business sales fell 0.9% (+12.5% y/y) in July following a 1.2% June increase. The inventory-to-sales ratio rose to 1.32, its highest level since February of last year, up from its low of 1.26 last November.

Retail inventories increased 1.2% (20.7% y/y) following a 2.0% June gain. Motor vehicle inventories jumped 3.5% (18.1% y/y) in July on top of a 3.3% June increase. Retail inventories excluding motor vehicles rose 0.4% (21.6% y/y) following a 1.6% June rise. Building materials inventories rose 1.5% (19.8% y/y) after rising 1.8%. General merchandise inventories increased 0.5% (29.6% y/y) after a 1.0% June gain. Food & beverage inventories edged 0.1% higher (11.3% y/y) after a 0.4% June gain. Clothing inventories declined 1.0% (+27.6% y/y) after a 2.4% increase.

Wholesale inventories posted a 0.6% increase (25.1% y/y) after rising 1.8% in June. The rise was down sharply from those during the last year. Factory inventories edged 0.1% higher (9.9% y/y) in July, the weakest increase since October 2020.

The decline in business sales in during July was led by a 1.4% drop (15.3% y/y) in wholesale sales. It reversed a 1.6% June rise. Factory shipments weakened 0.9% (+11.8% y/y) after rising 0.8% in June. Retail sales fell 0.3% (10.0% y/y) in July, following a 1.1% June rise.

The rise in the overall inventory-to-sales ratio in July was led by the retail sector where the I/S ratio increased to 1.23 from 1.21 in June. It was the highest level since February 2021. Excluding motor vehicle inventories, the retail I/S ratio was unchanged at 1.16 for the third straight month. The factory I/S ratio rose to 1.47, but stood just above its recent low. The wholesale sector I/S ratio rose to 1.29 in July from 1.26 in June.

The manufacturing and trade data are in Haver's USECON database. The Informa Global Markets forecast is in the MMSAMER database.

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