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Economy in Brief

U.S. Business Inventories Posted Another Solid Rise in January
by Sandy Batten  March 16, 2022

• Led again by a strong gain in retail inventories.

• Sales post marked rebound after December decline.

• Inventory-to-sales ratio drops to just a tick above all-time low.

Total business inventories rose 1.1% m/m (11.4% y/y) in January on top of a 2.4% m/m jump in December and monthly gains above 1% in both October and November. A 1.1% gain had been expected in the Informa Global Markets Survey. Business sales rebounded 3.7% m/m (15.5% y/y) in January following a 0.5% m/m decline in December. With sales rising faster than inventories in January, the inventory-to-sales ratio fell from 1.29 in December to 1.25 in January, just 0.01 above the all-time low of 1.24.

As had been the case in December, the January increase in inventories was broadly based and led by a 2.0% m/m (6.1% y/y) increase in retail inventories on top of a 4.7% m/m surge in December and a 2.0% rise in November. In the retail sector, general merchandise store inventories posted the largest monthly increase, rising 5.1% m/m in January top of a 4.3% jump in December. Clothing store inventories rose 4.0% m/m, their fifth consecutive solid monthly increase. Inventories at building materials and garden supplies stores increased 3.3%m/m, building on a 3.8% m/m gain in December. Furniture and appliance store inventories gained 2.0% m/m after a 5.6% m/m jump in December, and auto inventories were up 2.4% m/m. Auto inventories have risen 14.1% over the three months to January. Wholesale inventory growth in January moderated to 0.8% m/m from 2.6% m/m in December. Factory inventories rose 0.7% m/m in January following a 0.4% m/m increase in December.

Led by a 5.7% m/m rebound in retail sales in January, total business sales increased 3.7% m/m following a 0.5% m/m decline in December. The rebound reflected a 6.9% m/m jump in auto sales, a 5.4% m/m gain in furniture and appliance store sales, a 4.5% m/m rise in general merchandise store sales and a 2.7% m/m increase in sales at building supply and garden supply stores. In a separate release this morning, it was reported that retail trade sales were unchanged in February while retail trade sales excluding autos slipped 0.2% m/m in February. In January wholesale sales climbed 4.0% m/m, their strongest monthly gain since March 2021, after a 0.8% m/m rise in December. Manufacturing sales posted a 1.2% m/m gain in January, their largest monthly gain in three months.

With the rise in total sales outpacing the rise in inventories, the overall inventory-to-sales ratio fell from 1.29 in December to 1.25 in January, just 0.01 above the all-time low of 1.24 last reached in October 2021. The retail I/S ratio declined to 1.13 from 1.17. It had reached an all-time low of 1.07 in October 2021. The wholesale I/S ratio declined from 1.24 in December to 1.20 in January, tying the lowest reading since July 2014. The manufacturing I/S ratio edged down to 1.45 in January, its lowest since May 2019, from 1.46 in December.

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

Manufacturing & Trade Jan Dec Nov Jan Y/Y 2021 2020 2019
Business Inventories (% chg) 1.1 2.4 1.5 11.4 10.8 -2.6 2.4
  Retail 2.0 4.7 2.0 6.1 4.1 -5.7 0.6
    Retail excl. Motor Vehicles 1.8 3.9 1.3 15.1 13.2 0.7 1.7
  Merchant Wholesalers 0.8 2.6 1.7 18.1 18.9 -1.9 1.4
  Manufacturing 0.7 0.4 0.8 9.8 9.1 -0.5 5.3
Business Sales (% chg)
Total 3.7 -0.5 1.1 15.5 17.9 -3.0 0.0
  Retail 5.7 -3.0 0.7 12.6 18.0 3.1 3.0
    Retail excl. Motor Vehicle 5.3 -3.4 0.8 12.5 16.5 3.9 3.0
  Merchant Wholesalers 4.0 0.8 1.7 22.4 22.4 -4.9 -0.2
  Manufacturing 1.2 0.7 0.7 10.8 12.7 -6.7 -2.6
I/S Ratio
Total 1.25 1.29 1.25 1.30 1.27 1.43 1.42
  Retail 1.13 1.17 1.08 1.20 1.12 1.34 1.47
    Retail excl. Motor Vehicles 1.09 1.13 1.05 1.07 1.07 1.15 1.22
  Merchant Wholesalers 1.20 1.24 1.22 1.25 1.23 1.38 1.35
  Manufacturing 1.45 1.46 1.46 1.47 1.48 1.58 1.46
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