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Economy in Brief

U.S. Business Inventories Accumulate as Sales Decline
by Tom Moeller  July 14, 2017

Total business inventories increased 0.3% in May (2.4% y/y), only the second rise in the last seven months. Retail inventories gained 0.5% (3.1% y/y) and more than recouped April's decline. Motor vehicle & parts inventories jumped 1.1% (7.5% y/y). Retail inventories excluding autos rose 0.2% (0.8% y/y). Furniture inventories increased 0.7% (0.2% y/y). General merchandise inventories declined 0.8% (-3.8% y/y) and apparel inventories eased 0.1% (-0.8% y/y). Wholesalers' inventories gained 0.4% (1.9% y/y), but factory inventories eased 0.1% (+2.2% y/y).

Business sales declined 0.2% (+5.1% y/y), the second decline in three months. Retail sales eased 0.1% (+4.2% y/y), while excluding autos, sales fell 0.4%. Wholesale sector sales declined 0.5% (+6.2% y//y), down for the third straight month. Factory sector shipments ticked 0.1% higher (4.9% y/y).

The business sector inventory-to-sales ratio notched up to 1.38, the highest level in six months. The retail I/S ratio rose to 1.48, but has been trending near that level for a year. The 1.24 ratio excluding autos was down from 1.29 early last year. The auto sector ratio remained elevated at 2.26. The furniture sector ratio of 1.55 was down sharply versus 2010, nearly the lowest level of the economic expansion. The general merchandise ratio of 1.40 was down following a back-up late in 2015; it has been trending down sharply since the mid-1990s.The apparel sector's I/S ratio of 2.45 was up sharply since early-2012. The wholesale sector ratio of 1.29 was down sharply versus the early-2016 high and the factory sector ratio has been moving sideways since late last year.

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

Manufacturing & Trade May Apr Mar May Y/Y 2016 2015 2014
Business Inventories (% chg) 0.3 -0.2 0.2 2.4 2.3 1.8 3.4
 Retail 0.5 -0.2 0.2 3.1 3.8 4.7 3.0
  Retail excl. Motor Vehicles 0.2 -0.2 0.1 0.8 1.8 3.8 2.6
 Merchant Wholesalers 0.4 -0.4 0.1 1.9 2.5 1.2 5.8
 Manufacturing -0.1 0.0 0.2 2.4 0.8 -0.1 1.6
Business Sales (% chg)
Total -0.2 0.0 -0.1 5.1 -0.1 -3.2 2.8
 Retail -0.1 0.4 0.1 4.2 2.7 1.9 4.0
  Retail excl. Motor Vehicles -0.4 0.4 0.3 3.8 2.3 0.4 3.3
 Merchant Wholesalers -0.5 -0.3 -0.2 6.2 -0.5 -4.9 3.6
 Manufacturing 0.1 0.0 -0.2 4.9 -2.0 -5.8 1.3
I/S Ratio
Total 1.38 1.37 1.37 1.41 1.40 1.38 1.31
 Retail 1.48 1.47 1.48 1.49 1.48 1.45 1.43
  Retail excl. Motor Vehicles 1.24 1.23 1.24 1.28 1.27 1.26 1.23
 Merchant Wholesalers 1.29 1.28 1.28 1.34 1.33 1.32 1.21
 Manufacturing 1.38 1.38 1.38 1.41 1.41 1.39 1.31
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