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Economy in Brief

U.S. Business Inventory Gain the Strongest Since January Distorted by Oil Prices
by Tom Moeller August 13, 2008

Total business inventories jumped 0.7% during June after an upwardly revised 0.4% May increase. The latest increase exceeded Consensus expectations for a 0.5% rise and it was the strongest gain since January. The three-month growth in inventories rose to 6.2% (AR) from roughly 4% during the prior two months.

Higher wholesale inventories led the gain the total with a 1.1% jump during June and at a 14.1% rate during the last three months, again boosted by the rise in oil prices. Nevertheless, less petroleum wholesale inventories rose at a 12.0% rate during those three months which was more than twice the rate of increase during all of last year.

Retail inventories fell 0.1% after a revised 0.3% May decline. The drops left the three-month growth rate negative at -0.5% reflecting the draw-down of automobile inventories. Inventories of motor vehicle & parts fell at a 6.2% annual rate during the last three months due to further production cutbacks. Outside of autos, retail inventories rose at a 2.2% rate over the last three months and that reversed three months of decumulation.

The industry detail in the retail sector indicated that lower apparel inventories led the recent weakness in the total with a 0.9% rate of decline. Furniture inventories rose at a 3.9% rate during the last three months and general merchandise inventories rose at a 2.3% rate. Both of these gains reverse prior declines. Clothing & accessory store inventories still fell at a 0.9% rate over the last three months after an 8.1% rate of decline back in March.

Factory inventories jumped 1.0% and that left the three-month rate of accumulation steady at 6.4%.

Total business sales jumped another 1.7% led higher by the rise in oil prices which lifted factory sales by 1.6%.

Business Inventories June May Y/Y 2007 2006 2005
Total 0.7% 0.4% 5.6% 3.8% 5.9% 6.0%
  Retail -0.1% -0.3% 0.9% 2.6% 3.5% 2.3%
    Retail excl. Auto 0.1% -0.1% 1.3% 2.7% 4.9% 3.9%
  Wholesale 1.1% 0.9% 9.5% 5.5% 8.3% 7.3%
  Manufacturing 1.0% 0.6% 7.0% 3.7% 6.4% 8.9%
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