U.S. Business Inventory Accumulation Remains Strong

Businesses want more inventories lining the shelves. A 0.7% increase in inventories during October eased after an upwardly revised 1.3% September gain. However, the 6.9% y/y increase was nearly the strongest since late-2006. Inventory accumulation certainly was voluntary since it accompanied a 1.4% increase (9.3% y/y) in business sales. Despite all the inventory accumulation, the inventory-to-sales ratio at 1.27 roughly approximated its trend level before the recession began. That represents a significant correction after the unwanted surge during the economic downturn.

The picture of quicker inventory accumulation is not, however, broad-based. Retail inventories in fact fell 0.6% led by a 1.3% drop (+15.4% y/y) in motor vehicles. Less autos inventories slipped 0.3% and have risen just a moderate 2.2% from last year. A 0.2% increase (1.0% y/y) in apparel was offset by a 0.8% decline in furniture (+1.3% y/y) and a 0.1% dip in general merchandise (3.6% y/y).

In the wholesale sector the picture of accelerated inventory is distorted, but not by much, by the rise in oil prices. Overall, inventories surged 1.9% during October and by 9.9% from last year. However, petroleum inventories surged 3.5% (26.2% y/y) with higher prices. Less petroleum, wholesale inventories rose 1.8% during October and by 9.2% y/y.

In the factory sector, inventories jumped another 0.9% (5.8% y/y) following the 8.8% decumulation during 2009.

The business sales and inventory data are available in Haver's USECON database. Note that in a value-added feature, the database includes series calculated by Haver database managers showing sales, inventories and I/S ratios for total business less motor vehicle dealers and related wholesale operations.