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US inventory-to-sales ratio hits highest level since 2009

Friday, February 12, 2016 - 23:18

[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 per cent after a revised 0.1 per cent dip in November. Inventories in November were previously reported to have dropped 0.2 per cent.

Economists polled by Reuters had forecast inventories, which are a key component of gross domestic product, nudging up 0.1 per cent in December.

Retail inventories excluding autos, which go into the calculation of GDP, increased 0.2 per cent in December after gaining 0.3 per cent in November.

The government in its advance GDP report last month estimated that the economy grew at a 0.7 per cent 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 per cent.

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 per cent in December after declining 0.4 per cent 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.

REUTERS

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