Business Sales Rose Faster than Inventories in May

Business inventories rose +.5% MoM (consensus +.3%) in May, while sales grew an even faster +1.3% MoM. Versus May of last year, total inventories have risen +4% YoY, with all categories except autos seeing gains. Total sales have also risen 4% YoY, with the best gains seen by wholesalers.

Manufacturers saw the smallest inventory accumulation with a gain of +.3% MoM. Ex-auto retailers saw the largest increase at +.7% MoM. Retailers saw the largest sales gains, at +1.6% MoM while manufacturers saw the smallest at +1% MoM.

The inventory to sales ratio dropped to 1.26 months of supply at the current sales pace in May, unchanged from a year earlier, but down from 1.3 as recently as last February. All subcategories saw declines, with wholesale I/S ration falling to 1.11 months, manufacturers down to 1.23, and retailers declining to 1.45.

Inventories have been reduced steadily over the past six months to reduce excess supplies. This has reduced GDP growth for the prior two quarters. Leaner inventories should help businesses cope with the slowing retail sales observed this morning.