Inventory-to-sales ratio of US hits highest level
WASHINGTON: US business inventories edged up in December as sales fell, pushing the inventory-to-sales ratio to its highest level in 6-1/2 years.
The Commerce Department said on Friday inventories rose 0.1 percent after a revised 0.1 percent dip in November. Inventories in November were previously reported to have dropped 0.2 percent.
Economists polled by Reuters had forecast inventories which are a key component of gross domestic product nudging up 0.1 percent in December. Retail inventories excluding autos which go into the calculation of GDP increased 0.2 percent in December after gaining 0.3 percent in November.
The government in its advance GDP report last month estimated that the economy grew at a 0.7 percent annual rate in the fourth quarter. But weak construction spending, wholesale inventory and factory orders reports already had suggested that fourth-quarter GDP growth could be revised down to an annual rate of about 0.3 percent.
A record inventory accumulation in the first half of 2015, which outpaced demand, left businesses stuck with unsold merchandise and little incentive to order more goods. That has contributed to a sharp downturn in manufacturing. Business sales fell 0.6 percent in December after declining 0.4 percent in November. At December’s sales pace, it would take 1.39 months for businesses to clear shelves. That was the highest inventory-to-sales ratio since May 2009 and up from 1.38 in November. The lofty ratio suggests businesses could continue working through the inventory glut through the first quarter, curbing GDP growth.