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Economy in Brief

U.S. Business Inventories and Sales Rise the Same in July
by Sandy Batten  September 15, 2017

Total business inventories increased 0.2% in July (3.0% y/y) following a 0.5% m/m gain in June. Retail inventories slipped 0.1% m/m (3.4% y/y) in July after a 0.6% m/m jump in June. Motor vehicle and parts inventories were unchanged in July versus a 0.6% m/m surge in June but were still up 7.2% from a year earlier. Retail inventories excluding autos fell 0.2% m/m (+1.4% y/y) following a 0.5% m/m jump in June. A 0.6% m/m decline in inventories at general merchandise stores led the July decline. In contrast, inventories of building supplies surged 0.8% m/m in July. Wholesalers' inventories posted another sharp monthly increase, rising 0.6% m/m (3.3% y/y) in July, the same monthly gain as in June, while factory inventories rose 0.2% m/m (2.4% y/y) after a 0.3% m/m increase in June.

Business sales also increased 0.2% (4.9% y/y) in July, the same monthly gain as in June. Retail sales improved 0.3% (3.6% y/y), while excluding autos, sales rose 0.4% m/m (3.5% y/y). Wholesale sector sales slipped 0.1% m/m (5.9% y/y) in July following an outsized 0.6% m/m jump in June. Factory shipments rose 0.3% m/m (4.9% y/y) in July after an upwardly revised 0.1% increase in June.

In general, business sales continue to grow more rapidly than inventories though the gap has shrunk over the past several months. As a result, apart from the overall retail sector, inventory-to-sales ratios are lower now than they were a year ago. With sales and inventories exhibiting the same monthly increase in July, inventory-to-sales ratios were little changed from June. The business sector inventory-to-sales ratio was unchanged at 1.38. The retail I/S ratio held steady at 1.48, where it has been for most of this year. The I/S ratio for the retail sector excluding autos edged down to 1.24 in July from 1.25, while the I/S ratio for the auto sector remained elevated at 2.26. The general merchandise store I/S ratio slipped to 1.40 in July from 1.41 in June; it has flattened out over the past several months after having trended down since the beginning of 2016. The wholesale sector's I/S ratio edged up to 1.30 from 1.29, and the manufacturing I/S ratio slipped to 1.37 in July from 1.38. The manufacturing I/S ratio has been very stable for all of 2017.

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

Manufacturing & Trade Jul Jun May Jul Y/Y 2016 2015 2014
Business Inventories (% chg) 0.2 0.5 0.3 3.0 2.3 1.8 3.4
 Retail -0.1 0.6 0.6 3.4 3.8 4.7 3.0
  Retail excl. Motor Vehicles -0.2 0.5 0.2 1.4 1.8 3.8 2.6
 Merchant Wholesalers 0.6 0.6 0.6 3.3 2.5 1.2 5.8
 Manufacturing 0.2 0.3 -0.2 2.4 0.8 -0.1 1.6
Business Sales (% chg)
Total 0.2 0.2 0.1 4.9 -0.1 -3.2 2.8
 Retail 0.3 -0.1 0.0 3.6 2.7 1.9 4.0
  Retail excl. Motor Vehicles 0.4 -0.2 -0.3 3.5 2.3 0.4 3.3
 Merchant Wholesalers -0.1 0.6 -0.1 5.9 -0.4 -4.9 3.6
 Manufacturing 0.3 0.1 0.3 4.9 -2.0 -5.8 1.3
I/S Ratio
Total 1.38 1.38 1.37 1.40 1.40 1.38 1.31
 Retail 1.48 1.48 1.48 1.48 1.48 1.45 1.43
  Retail excl. Motor Vehicles 1.24 1.25 1.24 1.27 1.27 1.26 1.23
 Merchant Wholesalers 1.30 1.29 1.29 1.33 1.33 1.32 1.21
 Manufacturing 1.37 1.38 1.37 1.41 1.41 1.39 1.31
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