September Business Inventories
Updated 19-Nov-09 19:26 ET
Highlights
- Total business inventories declined 0.4% in September, well below the consensus expectation of -0.7%. Inventories fell 1.6% in August.
- Retailer inventories posted a strong 0.6% gain in September after declining 2.6% in August.
- Total business inventory to sales ratio held steady at 1.32% for the second consecutive month.
Key Factors
- The reason for the increase in retail inventories is simple. Auto dealers were left with low stocks in August after the Cash for Clunkers stimulus package. As sales stagnated in September, dealer inventories were replenished as inventories rose 3.8%.
- What was odd was that manufacturer shipments of automobiles fell 0.6% and light trucks and utility vehicles declined 4.4% in September. Instead of U.S. manufacturers doing the restocking, imported vehicles represented the bulk of the increase. In fact, September's trade data shows imported automotive vehicles, parts, and engines increased 11.5%.
- The manufacturing and trade inventories and sales data release is just a summary of the manufacturers report from Nov. 3, wholesaler report from Nov. 6, and the retail trade report from this morning.
- As a result, the report does not provide much insight into the strength of the economic recovery.
Big Picture
- Business inventories include wholesale inventories, manufacturing inventories, and retail inventories. Inventories are a component of GDP, and thus are of interest to economists, but the financial markets don't pay much attention to this release. Over the long term, the inventory-to-sales ratio has been declining, due to improving techniques for inventory management. Inventories are likely to decline over the near term to bring inventory-to-sales ratios back into line with company desires. Inventories will rise once sales pick up.
| Category |
SEP |
AUG |
JUL |
JUN |
MAY |
| Inventories |
-0.4% |
-1.6% |
-1.1% |
-1.4% |
-1.2% |
| Manufacturers |
-1.0% |
-0.9% |
-0.9% |
-1.1% |
-0.8% |
| Retailers |
0.6% |
-2.6% |
-1.0% |
-1.2% |
-1.7% |
| Wholesalers |
-0.9% |
-1.3% |
-1.6% |
-2.1% |
-1.2% |
| Sales |
-0.3% |
1.1% |
0.1% |
1.1% |
0.0% |
| Manufacturers |
0.8% |
-0.2% |
0.0% |
1.8% |
-0.8% |
| Retailers |
-2.6% |
2.8% |
-0.2% |
1.0% |
0.5% |
| Wholesalers |
0.6% |
1.1% |
0.5% |
0.3% |
0.4% |
| Inventory/Sales |
1.32 mo |
1.32 mo |
1.36 mo |
1.38 mo |
1.41 mo |
| Manufacturers |
1.36 mo |
1.38 mo |
1.39 mo |
1.41 mo |
1.45 mo |
| Retailers |
1.42 mo |
1.38 mo |
1.45 mo |
1.47 mo |
1.50 mo |
| Wholesalers |
1.18 mo |
1.20 mo |
1.23 mo |
1.25 mo |
1.28 mo |
