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Economy in Brief

U.S. Business Inventories Slip After Two-Month Increase
by Tom Moeller February 12, 2010

A developing trend towards accumulation of business inventories was cut short in December. The 0.2% yearend decline partially reversed gains during the prior two months which were the first in over a year. For the year business inventories fell a record 9.7% as prices and volumes declined. Perhaps the earlier accumulation resulted from slower sales growth. Business sales in December were below the pace during three of the prior four months. As a result, the inventory/sales ratio fell back to the cycle low of 1.26 from a January '09 high of 1.46.

Lower manufacturing and wholesale inventories led the December decline after earlier gains which, in the case of wholesalers, was led by higher petroleum prices. Total retail inventories were unchanged after steady declines since August 2008. Cuts last month were led by food & beverage stores with a 1.5% (-0.6% y/y) decline. Elsewhere, inventory cutting slowed from earlier strong declines. Furniture inventories even have risen during three of the last four months while clothing and general merchandise inventories are falling at slower rates. Auto dealer inventories slipped m/m and are down by one-quarter y/y.

Retailers' inventory/sales ratio fell to a new cycle low with sales gains and little inventory growth. The I/S ratio for department stores led the decline with little increase elsewhere. Wholesalers' ratio also fell to a near-record low while the I/S ratio in the factory sector fell to the lowest level since July 2008. 

The business sales and inventory data are available in Haver's USECON database.

Business Inventories (%) December November October Y/Y 2009 2008 2007
Total -0.2 0.5 0.3 -9.7 -9.7 0.4 4.0
  Retail 0.0 -0.2 -0.0 -10.6 -10.6 -3.3 2.5
    Retail excl. Auto 0.2 -0.3 -0.2 -5.1 -5.1 -1.9 2.7
  Wholesale -0.8 1.6 0.6 -10.2 -10.2 2.5 6.2
  Manufacturing -0.1 0.2 0.4 -8.6 -8.6 2.2 3.7
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