Your Economy (No Politics)

[Bullwinkle]

U.S. business inventories rise 0.5% in November
Friday, January 13, 2006 3:41:12 PM
http://www.afxpress.com


WASHINGTON (AFX) -- U.S. business inventories increased 0.5% in November as sales grew a tepid 0.1%, the Commerce Department reported Friday

With inventories growing faster than sales, the inventory-to-sales ratio rose to 1.26 from a record low 1.25 in October. It was the first increase in the ratio since February

Economists had expected inventories to increase 0.4% in November, according to a survey conducted by MarketWatch. In addition, inventory growth in October was revised higher, to 0.4% vs. 0.3% reported earlier. Tight inventories give companies a strong incentive to increase production and hiring to match demand. Imports are also likely to increase. The lean level of inventories gives economists confidence that the odds of a recession are very unlikely

The typical business had 38.4 days of sales on hand in October. Better inventory controls have allowed companies to operate with leaner and leaner stockpiles. If inventories get too tight, however, companies risk losing customers to competitors better able to deliver the goods

Tight inventories can also fuel inflationary pressures, as customers bid up prices on increasingly scarce goods

Economists had expected the inventory rebuilding to begin in the third quarter, but data show inventory depletion subtracted 0.44 percentage points from growth

It's likely that inventory rebuilding will add to growth in the fourth quarter, offsetting weakness in consumer spending. Much of the data in Friday's report had been released earlier. The one main new piece of news was retail inventories, which increased 0.9% in November while sales increased 0.8%. Retail auto inventories increased 2.1% as sales jumped 5.7%

Excluding autos, retail inventories increased 0.3%

The retail inventory-to-sales ratio remained at 1.46

In a separate report released Friday, the Commerce Department said U.S. retail sales rose 0.7% in December on strengthening auto and gasoline sales. In another report, the Labor Department said the producer price index increased 0.9% in December on higher energy costs. Core inflation at the wholesale level rose 0.1%. Other details of the inventory report had been released earlier. Inventories at manufacturers increased 0.2% in November, while sales rose 0.2%. The inventory-to-sales ratio held steady at 1.18

Inventories at wholesalers increased 0.4% in November, while sales fell 0.7%. The inventory-to-sales ratio rose to 1.15 from 1.14

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