Business Inventories Rise, Not Keeping Pace With Sales

Inventories are rising but are not keeping pace with sales in what is very good news for the economy but not such good news for fourth-quarter GDP. Business inventories rose 0.4 percent in November with October revised 1 tenth higher to no change. Two months into the fourth quarter the inventory build is a bit slower than the build in the third quarter which will hold down GDP.

Sales surged 1.2 percent in November and follow October's 0.8 percent rise. These are very strong numbers that aren't being matched by inventories which is reflected in the inventory-to-sales ratio which is down a notch to 1.33. This is very lean and points to the need for restocking, and restocking in turn points to the need for production increases and hiring. This is a very positive setup going into 2018.

Wholesalers were the most active in November, building inventories by 0.8 percent following a sharp 0.4 percent draw in October. Inventories at manufacturers were up 0.4 percent and 0.3 percent in the two months with retail inventories flat, up 0.1 percent in November following no change in October.

Recent History Of This Indicator:
Business inventories have been rising in line with underlining sales though October did see a 0.1 percent draw. Forecasters are expecting a 0.3 percent build for November inventories.