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US Business Inventories Edge Up Slightly in December

H.S. Borji
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US business inventories rose slightly in December, a sign stockpile accumulation was playing a lesser role in economic growth in the fourth quarter.

Business inventories – an indicator of stockpiles held by manufacturers, retailers and wholesalers that is used to calculate gross domestic product – increased 0.1 percent to $1,764.4 billion in December, following a 0.2 percent advance the previous month, the Commerce Department reported today in Washington. A median estimate of economists called for a monthly gain of 0.2 percent.

Compared to December 2013, business inventories were up 3.9 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 declined in December, official data showed. The combined value of distributive trade sales and manufacturers’ shipments was estimated at $1,331.2 billion, down 0.9 percent from November. Year-on-year, sales were up 0.9 percent.

The inventory-to-sales ratio at the end of December was 1.33, the highest since July 2009. The December 2013 ratio was 1.29.

In adjusted terms, retail inventories increased 0.5 percent in December. Year-on-year, retail inventories were up 2.8 percent.

Manufacturing inventories declined 0.3 percent from November. Compared to December 2013, manufacturing inventories were up 2.7 percent.

Stockpile accumulation at merchant wholesalers increased 0.1 percent in December. Year-on-year, merchant wholesale inventories were up 6.8 percent.

Slower inventory accumulation suggests fourth quarter growth was slower than initially forecast. Last month the Commerce Department said the US economy expanded 2.6 percent annually in the fourth quarter. Inventories added 0.8 percentage points to that tally. The latest data suggest government economists could revise the fourth quarter estimate to as low as 1.7 percent. The Commerce Department will published its revision on February 27.

In a separate report today the Commerce Department said retail sales declined more than forecast in January, a sign households were holding back on purchasing a variety of goods. Retail sales declined 0.8 percent in January following a 0.9 percent drop the previous month. Economists forecast a decrease of 0.5 percent.

Excluding automobiles, retail sales tumbled 0.9 percent. Core sales, which are more closely aligned with the consumer spending component of gross domestic product, were up only 0.1 percent.

Compared to January 2014, retail revenues were up 3.3 percent, official data showed.

Sales were down in seven of the 13 major sub-sectors last month. Sales at gasoline stations tumbled 9.3 percent from December and 23.5 percent annually. Meanwhile, sales at motor vehicle and parts dealers tumbled 0.5 percent. Sales at furniture stores fell 0.7 percent, while clothing and accessory stores saw receipts decline 0.8 percent.

The retail category to post the biggest gain in January was miscellaneous store retailers. Sales in this component increased 2.6 percent from December and 7 percent annually. Electronics and appliance stores also boosted revenues by 0.3 percent.

The US dollar declined sharply following today’s data. The US dollar index, a broad gauge of the greenback’s performance against six currencies, declined 0.62 percent to 94.40. The dollar suffered sharp losses against the euro, yen, British pound and Canadian dollar on Thursday.

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