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Economy in Brief

Business Inventories Rise Further in May; Sales Slow
by Sandy Batten  July 15, 2016

Total business inventories edged up 0.2% m/m (1.0% y/y) following an unrevised 0.1% m/m increase in April. Total business sales slowed to a 0.2% m/m rise (-1.4% y/y) in May after a 0.8% m/m jump in April (revised down slightly from the initially reported 0.9% m/m gain).

The new information in today's release was for retail inventories. Manufacturing and wholesale inventories had already been reported. Manufacturing inventories were down 0.1% in May (their eleventh consecutive monthly decline) while wholesale inventories edged up 0.1% m/m, their third consecutive monthly increase following five consecutive monthly declines.

Retail inventories rose 0.5% m/m in May (6.0% y/y) after an unexpected 0.1% m/m decline in April. Before the April decline, retail inventories had risen for ten consecutive months. In May, retail inventories excluding motor vehicles and parts rose 0.4% m/m (3.4% y/y) with increases across all major categories. Inventories of motor vehicles and parts jumped 0.7% m/m in May after having been unchanged in April.

Sales were generally up across sectors in May. Retail sales added a 0.2%m/m gain in May (revised down from the initially reported 0.4% m/m increase) to the 1.4% m/m jump recorded in April. Adding the June figure for retail sales (a 0.6% m/m increase reported today separately from this release), retail sales in the second quarter were up 6.2% at an annual rate from the first quarter, pointing to a sharp rebound in household consumption in 2Q from the weak performance in 1Q. Wholesale sales rose a solid 0.5% m/m in May after a downwardly revised 0.8% m/m gain in April, their third consecutive significant increase after four straight monthly declines. Manufacturing sales were essentially unchanged in May from April, after solid gains in March (+0.3% m/m) and April (+0.4% m/m).

The inventory-to-sales ratio in the business sector remained at 1.40 in May. In April, it had edged down from 1.41, the highest since the economy exited recession in 2009. Inventory-to-sales ratios were also unchanged in May from April for retailers (1.50) and manufacturers (1.36)-but again down from February/March levels that were the highest in the current economic expansion. The inventory-to-sales ratio for wholesalers edged down to 1.35 in May from 1.36 in April, its fourth consecutive unchanged or lower monthly reading.

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

Manufacturing & Trade May Apr Mar May Y/Y 2015 2014 2013
Business Inventories (% chg) 0.2 0.1 0.3 1.0 1.3 3.7 3.9
 Retail 0.5 -0.1 0.9 6.0 5.3 3.1 7.4
  Retail excl. Motor Vehicles 0.4 -0.2 0.1 3.4 4.1 2.6 4.8
 Merchant Wholesalers 0.1 0.7 0.2 0.5 1.9 6.5 4.0
 Manufacturing -0.1 -0.1 -0.1 -3.0 -2.6 1.8 1.0
Business Sales (% chg)
Total 0.2 0.8 0.2 -1.4 -2.6 2.8 2.9
 Retail 0.2 1.4 -0.3 1.8 1.6 3.9 3.8
  Retail excl. Motor Vehicles 0.4 0.9 0.5 2.1 0.2 3.2 2.6
 Merchant Wholesalers 0.5 0.8 0.6 -2.5 -4.3 3.6 3.1
 Manufacturing 0.0 0.4 0.3 -3.2 -4.4 1.2 2.1
I/S Ratio
Total 1.40 1.40 1.41 1.37 1.38 1.31 1.29
 Retail 1.50 1.50 1.52 1.44 1.46 1.43 1.41
  Retail excl. Motor Vehicles 1.28 1.28 1.29 1.26 1.27 1.24 1.23
 Merchant Wholesalers 1.35 1.36 1.36 1.31 1.32 1.21 1.18
 Manufacturing 1.36 1.36 1.37 1.36 1.36 1.31 1.30
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