U.S. Business Inventories Grow in March, Alongside Sales

Total U.S. manufacturers’ and trade inventories grew in March—by the highest rate since June 2015—alongside total distributive trade sales and manufacturers’ shipments, helping keep the total inventories-to-sales ratio flat in the month.

The U.S. Census’ measure of business inventories is a good barometer of business confidence, says NACM Economist Chris Kuehl, Ph.D. “There was far too much inventory only a few months ago and there has been a concentrated effort to work that down ever since,” he said. “As long as companies are not adding inventory, there is going to be a general production lull in the economy as a whole.” Indeed, in March, business inventories rose 0.4% from February’s figure to $1.819 trillion, while inventories were up 1.5% over the prior year, Census said.

Retailers led the total inventories rise with a 1% increase in March, though manufacturers and wholesalers also saw slight increases. Within retail inventories, auto inventories jumped the most with a 2.3% increase, which is not unexpected given the decline in March auto sales, Wells Fargo Senior Economist Tim Quinlan noted. “While the inventory adjustment may continue, we expect less of a drag on GDP growth moving forward,” he said. “However, inventories are notoriously volatile.”

The inventory-to-sales ratio remained unchanged from February to March at 1.41.

Inventory expansion followed a March increase in sales, which were up 0.3% to an estimated $1.289 trillion, year-over-year. Still, sales fell 1.7%. Merchant wholesales performed best among industries in March, with sales growing 0.7%. Retailers, on the other hand, disappointed with a sales decline of 0.3% in March.

- Nicholas Stern, NACM editorial associate

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