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Economy in Brief

U.S. Business Inventories and Sales Rise in Tandem in July
by Tom Moeller  September 16, 2021

• Inventory accumulation slows.

• Sales increase held back by retail decline.

• Inventory-to-sales ratio steadies.

Total business inventories increased 0.5% (7.2% y/y) during July following a 0.9% June increase, revised from 0.8%. This was the smallest gain in three months and matched expectations in the Informa Global Markets Survey. Business sales also rose 0.5% (16.3% y/y) after a 1.6% June gain, revised from 1.4%. With inventories and sales rising at the same pace, the inventory-to-sales ratio (I/S) held steady at 1.25 in July. This matched the lowest level since February 2012.

By sector, wholesale inventories increased 0.6% (11.5% y/y) in July, the weakest gain this year. Factory inventories rose 0.5% (6.5% y/y) in July, also the smallest increase this year. Retail inventories rose 0.4% (3.5% y/y). That came after a 0.5% June rise which was the first monthly increase in four months. Motor vehicle inventories edged 0.2% higher (-14.3% y/y), the first monthly increase this year. Food and beverage inventories rose 0.7% (6.3% y/y), the first increase in three months. Also rising were furniture, electronics & appliance inventories by a strong 2.1% (23.2% y/y) and building materials inventories, up 0.9% (23.2% y/y. Clothing inventories fell 1.0% (-1.8% y/y) after a 0.9% decline.

The July gain in business sales occurred as wholesale sales rose 2.0% (23.7% y/y) following a 2.3% June gain. Also rising were factory sector shipments by 1.6% (12.3% y/y) after rising 1.9% in June. Offsetting these gains was a 2.2% decline (+12.7% y/y) in retail sales following a 0.7% rise in June. Retail sales excluding sales of motor vehicles fell 1.4% (+12.0% y/y) and reversed the June increase.

The stability in the I/S ratio occurred as an increase in the retail ratio to 1.11 in July from 1.08 was offset by declines in both the wholesale and factory ratios. After excluding motor vehicles, the retail sector I/S ratio rose to 1.08, its highest level since February. A rise in the clothing ratio to 1.86 and the building materials ratio to 1.75 was accompanied by the general merchandise increase to 1.27. The food & beverage store ratio edged up to 0.73.

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

Manufacturing & Trade Jul Jun May Jul Y/Y 2020 2019 2018
Business Inventories (% chg) 0.5 0.9 0.6 7.2 -2.6 2.4 4.5
  Retail 0.4 0.5 -0.9 3.3 -5.6 0.6 4.4
    Retail excl. Motor Vehicles 0.5 0.7 0.8 11.0 0.8 1.7 3.4
  Merchant Wholesalers 0.6 1.2 1.3 11.5 -1.7 1.4 6.2
  Manufacturing 0.5 1.0 1.1 6.5 -0.5 5.3 2.8
Business Sales (% chg)
Total 0.5 1.6 -0.2 16.3 -2.9 0.0 5.7
  Retail -2.2 0.7 -2.0 12.7 3.1 3.0 4.2
    Retail excl. Motor Vehicle -1.4 1.5 -1.2 12.0 4.0 3.0 5.0
  Merchant Wholesalers 2.0 2.3 0.8 23.7 -4.8 -0.2 6.7
  Manufacturing 1.6 1.9 0.9 12.3 -6.7 -2.6 6.0
I/S Ratio
Total 1.25 1.25 1.26 1.36 1.43 1.42 1.36
  Retail 1.11 1.08 1.08 1.21 1.34 1.47 1.46
    Retail excl. Motor Vehicles 1.08 1.06 1.07 1.09 1.15 1.22 1.21
  Merchant Wholesalers 1.20 1.22 1.23 1.33 1.38 1.35 1.28
  Manufacturing 1.46 1.48 1.49 1.54 1.58 1.46 1.37
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