U.S. Business Inventories Increase as Sales Strengthen

Total business inventories increased 0.4% in November (3.2% y/y) following no change during the prior two months. Total business sales jumped 1.2% (7.9% y/y), the fourth consecutive month of strong gains. The moderate rise in inventories coupled with sales strength lowered the inventory/sales ratio to 1.33, down sharply from its 1.42 high in April 2016.

Retail inventories ticked 0.1% higher (1.9% y/y) following no change in October. Auto inventories were unchanged (2.2% y/y) following two months of decline. Nonauto retail inventories improved 0.2% (1.7% y/y) after a 0.4% gain. Grocery store inventories increased 0.8% (3.5% y/y) and building materials inventories rose 0.1% (2.7% y/y). Clothing store inventories declined 0.4% (-1.9% y/y) while general merchandise inventories slipped 0.1% (-1.1% y/y). Furniture store inventories dropped 0.5% (+0.9% y/y) following a 0.7% fall. As reported earlier this week, wholesale inventories increased 0.8% in November (4.0% y/y) following a 0.4% decline. Also reported earlier, factory sector inventories increased 0.4% (3.7% y/y) after a 0.3% rise.

Overall business sales surged 1.2% due to strength across business sectors. As reported last month, November retail sales gained 0.9% (6.6% y/y) while nonauto sales jumped 1.5% (6.9% y/y). Wholesale sector sales also strengthened 1.5% (9.8% y/y) as shipments from the factory sector surged 1.2%, strong for the fourth straight month.

The inventory-to-sales ratio in the retail sector eased to 1.42. Sharp declines in recent months left the ratio at its lowest point since September 2014. The nonauto I/S ratio also declined to 1.20, its lowest level since early 2012.  The wholesale sector I/S ratio eased to 1.24, the lowest point in three years. In the manufacturing sector, the I/S ratio slipped to 1.35, also its lowest point in three years.

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