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Economy in Brief

U.S. Business Inventories Edge Down as Expected in April
by Peter D'Antonio  June 15, 2021

• Inventory gains appear to be stalling.

• April business sales built on March gains.

• Inventory-to-sales ratio continued to decline.

Total business inventories edged down 0.2% (+1.3% y/y) during April reversing the 0.2% March rise. Inventories had risen by an average of 0.7% per month for the prior half year. April business sales increased by 0.6% (40.0% y/y) following a 5.8% surge in March. Sales are up 9.5% thus far this year.

Retail inventories declined sharply in the past two months. The 1.8% drop (-5.2% y/y) in April followed a 1.4% decline in March. These declines were entirely due to the 13.3% two-month plunge in motor vehicle stocks, which account for 27% of total retail inventories. Excluding motor vehicles, retail inventories rose 0.6% (+6.0% y/y) after a 0.7% rise. Furniture inventories gained 0.7% (+6.1% y/y) and inventories of building materials and garden supplies increased 0.8% (+17.4% y/y). Clothing inventories increased 2.3% (+9.5% y/y) and general merchandise inventories rose 0.6% (+8.9% y/y). Wholesale inventories increased 0.8% (5.2% y/y) in April while factory inventories rose 0.3% (3.6% y/y).

April business sales improved on their strong March gains. Retail sales increased 0.5% (48.1% y/y) after surging 11.0% in March. However, May retail sales were released earlier today and showed some retreat from the tremendous early-year gains, declining 1.4% (+28.2% y/y).

April wholesale sales strengthened 0.8% (43.6 y/y), while manufacturing shipments rose 0.4% (28.2% y/y).

As sales continued to grow faster than inventories through April, the inventory-to-sales (I/S) ratio fell to a 10-year low of 1.25 (down from 1.35 at the end of 2020). The bulk of this year's decline in the I/S ratio has been in the retail sector, which fell to a record low of 1.07 (from 1.28 at yearend). I/S ratios remained unchanged in April for wholesale trade (1.22) and manufacturing (1.48).

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

Manufacturing & Trade Apr Mar Feb Apr Y/Y 2020 2019 2018
Business Inventories (% chg) -0.2 0.2 0.6 1.3 -2.6 2.4 4.5
  Retail -1.8 -1.4 0.1 -5.2 -5.6 0.6 4.4
    Retail excl. Motor Vehicles 0.6 0.7 1.4 6.0 0.8 1.7 3.4
  Merchant Wholesalers 0.8 1.2 1.0 5.2 -1.7 1.4 6.2
  Manufacturing 0.3 0.8 0.8 3.6 -0.5 5.3 2.8
Business Sales (% chg)
Total 0.6 5.8 -1.6 40.0 -2.9 0.0 5.7
  Retail 0.5 11.0 -3.0 48.1 3.1 3.0 4.2
    Retail excl. Motor Vehicle -0.7 9.2 -2.8 35.2 4.0 3.0 5.0
  Merchant Wholesalers 0.8 4.3 0.0 43.6 -4.7 -0.2 6.7
  Manufacturing 0.4 2.1 -1.8 28.2 -6.7 -2.6 6.0
I/S Ratio
Total 1.25 1.26 1.33 1.73 1.43 1.42 1.36
  Retail 1.07 1.10 1.23 1.67 1.34 1.47 1.46
    Retail excl. Motor Vehicles 1.04 1.03 1.12 1.33 1.16 1.22 1.21
  Merchant Wholesalers 1.22 1.22 1.26 1.67 1.38 1.35 1.28
  Manufacturing 1.48 1.48 1.50 1.83 1.58 1.46 1.37
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