Business Sales Strong in August 2011

The headlines for August 2011 USA business sales say sales are up 0.3% month-over-month, and 11.8% year-over-year. Econintersect’s analysis shows sales are up 3.9% month-over-month, and up an inflation adjusted 8.1% year-over-year.

Econintersect sees this data as good.  There are no recession indications here.

The way data is released, differences between the business releases pumped out by the U.S. Census Bureau are not easy to understand with a quick reading. The entire story doesn’t really come together until the Business Sales Report (this report) comes out.

Yesterday (analysis), Econintersect analyzed advance retail sales for September 2011. That is early data for the month after the data for this post. This is final data from the Census Bureau for August 2011 for:

The headlines:

Sales. The U.S. Census Bureau announced today that the combined value of distributive trade sales and manufacturers’ shipments for August, adjusted for seasonal and trading-day differences but not for price changes, was estimated at $1,201.4 billion, up 0.3 percent (±0.2%) from July 2011 and up 11.8 percent (±0.3%) from August 2010.

Inventories. Manufacturers’ and trade inventories, adjusted for seasonal variations but not for price changes, were estimated at an end-of-month level of $1,535.9 billion, up 0.5 percent (±0.1%) from July 2011 and up 10.5 percent (±0.3%) from August 2010.

Inventories/Sales Ratio. The total business inventories/sales ratio based on seasonally adjusted data at the end of August was 1.28. The August 2010 ratio was 1.29.

Econintersect evaluates the data using similar logic to GDP improvement calculations. Data is compared year-over-year, then the year-over-year results are compared month-over-month. The methodology used by U.S. Census compares data over many years.

Inflation adjusted business sales were in a clear downward trend for most of 2011.  They have now rebounded somewhat breaking the downward sloping trend line.  As one month is not a trend, a new business sales trend line may be defined in the months to come – or the current data point could prove to be a noise feature for the old trend line.

Using inflation adjustments, analysts can more clearly count the quantity of business transactions.  Inflation adjusted data shows there are currently no signs of recession.

Many analysts pay particular attention to inventories in this report.  Inventories, expressed as a ratio to sales, contracted slightly and remain well within the historical levels for past Augusts. A unusual rise in this ratio would suggest the economy was contracting.

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