U.S. Business Inventories Increased in December while Sales Fell
by:Sandy Batten
|in:Economy in Brief
Summary
• Inventories continued to increase. • Sales posted second consecutive decline. • Inventory-to-sales ratio rose to highest in more than two years.
Total business inventories rose 0.3% m/m (12.7% y/y) in December following a downwardly revised 0.3% monthly increase in November (initially 0.4% m/m). A 0.4% gain had been expected by the Informa Global Markets Survey. Business sales fell 0.6% m/m (+6.4% y/y) in December after a downwardly revised 1.2% m/m decline in November (initially -0.8% m/m). This was the second consecutive monthly decline in sales. The annual pace was the slowest since February 2021. With sales falling while inventories rose, the inventory-to-sales ratio rose to 1.37 in December, its highest level since November 2020, versus 1.35 in November and well above the recent low of 1.25 reached in October 2021.
Retail inventories increased 0.7% m/m in December, their first increase in four months, following an essentially unchanged reading in November. Motor vehicle inventories increased 1.4% m/m in December on top of a 1.1% m/m increase in November. Excluding autos, the remainder of inventories rose 0.4% m/m, offsetting an upwardly revised 0.4% monthly decline in November. Inventories at furniture, home furnishings, and electronics and appliances stores jumped up 3.1% m/m, their first monthly increase in six months. Inventories at general merchandise stores rose 0.7% m/m, their first monthly increase in four months.
Wholesale inventories edged up 0.1% m/m in December, their smallest increase since the economy emerged from the pandemic lockdown, following a 0.9% monthly increase in November. Manufacturing inventories rose 0.4% m/m in December after having been unchanged in November.
Retail sales slumped 1.3% m/m in December on top of a 1.1% m/m decline in November. However, in a separate release this morning, retail sales were reported to have rebounded 3.0% m/m in January. Seasonal adjustment may have played a role in the January rebound. Holiday sales were especially weak in November and December and so the normal seasonal decline in January was much smaller than usual. Wholesale sales were essentially unchanged in December after a downwardly revised 1.4% m/m drop in November (initially -0.6% m/m). Factory shipments declined 0.7% m/m in December on top of a downwardly revised 0.9% m/m decline in November (initially -0.6% m/m).
The increase in inventories along with the fall in sales drove up the inventory-to-sales ratio to 1.37 in December, its highest since November 2020. The retail I/S rose to 1.26, its highest since December 2020, from 1.24. The wholesale I/S was unchanged at 1.36 in December, its highest since June 2020. The manufacturing I/S increased to 1.49 in December, its third consecutive monthly gain, from 1.47 in November.
The manufacturing and trade data are in Haver’s USECON database. The Informa Global Markets forecast is in the MMSAMER database.
Sandy Batten
AuthorMore in Author Profile »Sandy Batten has more than 30 years of experience analyzing industrial economies and financial markets and a wide range of experience across the financial services sector, government, and academia. Before joining Haver Analytics, Sandy was a Vice President and Senior Economist at Citibank; Senior Credit Market Analyst at CDC Investment Management, Managing Director at Bear Stearns, and Executive Director at JPMorgan. In 2008, Sandy was named the most accurate US forecaster by the National Association for Business Economics. He is a member of the New York Forecasters Club, NABE, and the American Economic Association. Prior to his time in the financial services sector, Sandy was a Research Officer at the Federal Reserve Bank of St. Louis, Senior Staff Economist on the President’s Council of Economic Advisors, Deputy Assistant Secretary for Economic Policy at the US Treasury, and Economist at the International Monetary Fund. Sandy has taught economics at St. Louis University, Denison University, and Muskingun College. He has published numerous peer-reviewed articles in a wide range of academic publications. He has a B.A. in economics from the University of Richmond and a M.A. and Ph.D. in economics from The Ohio State University.
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