U.S. Business Inventory Growth Increases but Still Lags Sales

Total business inventories increased 0.4% during April (2.6% y/y) following an unrevised 0.1% March uptick. During the last three months, inventory growth picked up to 3.2% (AR) from its January low of 0.1%. Total business sales increased 0.6% (-2.3% y/y), the same as during March. It raised the 3-month change to 3.3% (AR), its best since last July. As a result, the inventory/sales ratio for April held steady at 1.36, just off its expansion high of 1.37.

Inventories in the retail sector jumped 0.8% (3.8% y/y) leaving three-month growth at 6.6%, its quickest since July. General merchandise inventories surged 1.4% (1.5% y/y) and at a 3.6% rate since January. Auto inventories jumped 1.2% (5.9% y/y). Clothing inventories rose 0.9% (6.0% y/y) and at a 10.0% annual rate during the last three months. It was the quickest growth rate in over a year. Furniture inventories declined 0.3% (+0.6% y/y), off in three of the last four months.

Merchant wholesale inventories gained 0.4% (4.5% y/y) in April. The 3.1% rate of growth in the last three months was the slowest since mid-2013. Factory inventories improved 0.1% and by the same amount during the last 12 months. Three- month growth picked up, however, to a slim 0.5%.

The 0.6% rise in business sales (-2.3% y/y) left them rising at a 3.3% annual rate during the last three months, a turnaround from just the prior month. The latest increase reflected a 0.1% uptick (2.0% y/y) in retail spending but more life was apparent in May. Sales excluding motor vehicles slipped marginally (-1/0% y/y) but rose strongly in May. Wholesale sales jumped 1.6% (-3.3% y/y) helping to revive 3-month growth to 2.9%, the first positive reading since September. Factory shipments declined marginally (-3.6% y/y) but rose at a 2.6% rate during the last three months.

The total business inventory-to-sales ratio remained stable m/m but has been trending higher since early 2011. Each of the business sectors participated in the rise. The increase in the wholesale sector ratio to 1.29 is from a low of 1.12 early in 2011. This is nearly the highest since mid-2011. The retail sector realized an I/S ratio 1.46 in April, also nearly the highest since the middle of 2009. The ratio excluding autos displayed similar upward movement. The manufacturing sector I/S ratio is now also at the highest point since 2009.

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