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US business inventories advance further in October

H.S. Borji
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US business inventories rose steadily in October, as stockpile accumulation continued to add to economic growth at the start of the fourth quarter.

Business inventories – an indicator of stockpiles held by manufacturers, retailers and wholesalers that is used to calculate gross domestic product – increased 0.2 percent to $1,760.4 billion in October, following a similar increase the month before, the Commerce Department reported today in Washington. Economists forecast a monthly increase of 0.3 percent.

Compared to October 2013, business inventories were up 4.8 percent.

Changes in business inventories, which reflect the smallest component of GDP, imply changes in aggregate demand, which is a key indicator of future economic activity.

Business sales were virtually unchanged in September, official data revealed today. The combined value of distributive trade sales and manufacturers’ shipments was estimated at $1,350.9 billion, down 0.1 percent from the previous month. Year-on-year, sales were up 3.4 percent, official data showed.

The inventory-to-sales ratio at the end of October was 1.30, unchanged from the previous month.

In adjusted terms, retail inventories increased 0.2 percent in October, following a similar increase the previous month. Year-on-year, retail inventories were up 4.3 percent.

Manufacturing inventories edged up 0.1 percent, following a 0.2 percent gain in September. Compared to October 2013, manufacturing inventories were up 3.5 percent.

Stockpile accumulation at merchant wholesalers increased 0.4 in October, following a similar increase a month earlier. Year-on-year, wholesale inventories rose 6.8 percent.

In a separate report today the Commerce Department said November retail sales rose at the fastest pace in eight months, a sign improved wages and more plentiful jobs were boosting consumer confidence during the holiday season.

Retail revenues increased 0.7 percent to $449.3 billion in November, following a gain of 0.5 percent a month earlier. The gains were well above the median estimate of economists, which called for 0.3 percent.

Compared to November 2013, retail sales were up 5.1 percent, official data showed.

So-called core sales, which strip away volatile elements such as food and energy, increased 0.6 percent last month.

Excluding automobiles, retail sales advanced 0.5 percent, well above forecasts calling for 0.1 percent.

The gains were broad-based in November, as consumers took advantage of declining gas prices. Retail receipts increased in 11 of the 13 major categories, led by motor vehicle and parts dealers, building material and supplies, and clothing and related goods.

Retail sales account for one-third of consumer spending and are a key indicator of the overall economy. Today’s report suggests the labour market recovery was boosting consumer confidence at a key time for retailers, who rely heavily on holiday shopping. Last week the Labor Department said average hourly earnings rose 0.4 percent in November, the biggest increase since June of last year, as employers added 321,000 payrolls. The unemployment rate held steady at 5.8 percent.

Further declines in gas prices are likely to keep consumer spending elevated in the final month of the year. Crude oil plunged below $65 a barrel Wednesday, a five-year low. Brent crude stabilized below $65 a barrel Thursday, as the markets brace for an even bigger drop in the coming months.

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