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