Written by Steven Hansen
Business sales continued to show moderate growth in February 2012, while inventory-to-sales ratios remain low. Business sales combines manufacturing, wholesale and retail sales.
- The data this month was historically reset due to the new wholesale data baseline.
- Inventories look good with inventory-to-sales levels at historical lows for Februarys.
Advanced retail sales for March released today signaled the growth spurt seen this month will moderate with the next data release – however, a clear upward growth trend line will remain.
- sales up 0.7% month-over-month, up 7.6% year-over-year
- inventories up 0.6% month-over-month (up 7.6% year-over-year), sales-to-inventory ratios were up from 1.28 one year ago – and are now 1.28.
- market expected inventories to be up 0.4% to 0.5% (actual 0.6%)
- sales up 3.6% month-over-month, and up 11.9% year-over-year
- sales (inflation adjusted) up 4.4% month-over-month, up 8.3% year-over-year
- inventories unchanged month-over-month (up 7.4% year-over-year), sales-to-inventory ratios 1.35 which is on the low side of the historical channel for this month of the year (good: as high inventories are an recession signal).
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. At this point, a coherent and complete business contribution to the economy can be understood.
Today (analysis), Econintersect analyzed advance retail sales for March 2012. That is early data for the month after the data for this post. This is final data from the Census Bureau for February 2012 for:
- Manufacturing new orders up 5.8% month-over-month, and up 13.8% year-over-year
- Manufacturing new orders (inflation adjusted) up 6.4% month-over-month, up 9.0% year-over-year
- Manufacturing unfilled orders up 1.1% month-over-month, and up 10.6% (inflation adjusted 5.8%) year-over-year
- sales up 3.6% month-over-month, and up 14.0% year-over-year
- sales (inflation adjusted) up 5.2% month-over-month, up 11.3% year-over-year
- inventories up 0.4% month-over-month, sales-to-inventory ratios 1.26 which is a new normal low for Februarys (good: inventories are not growing).
- sales up 1.1% month-over-month, up 6.5% year-over-year
- the market was expecting 1.0% to 1.8% sales growth month-over-month
Sales. The U.S. Census Bureau announced today that the combined value of distributive trade sales and manufacturers’ shipments for February, adjusted for seasonal and trading-day differences but not for price changes, was estimated at $1,236.7 billion, up 0.7 percent (±0.2%) from January 2012 and up 7.6 percent (±0.4%) from February 2011.
Inventories. Manufacturers’ and trade inventories, adjusted for seasonal variations but not for price changes, were estimated at an end-of-month level of $1,577.8 billion, up 0.6 percent (±0.1%) from January 2012 and up 7.6 percent (±0.4%) from February 2011.
Inventories/Sales Ratio. The total business inventories/sales ratio based on seasonally adjusted data at the end of February was 1.28. The February 2011 ratio was 1.28.
Please see caveats at the end of this post on the differences between Econintersect data analysis methodology and U.S. Census.
This is the seventh straight month of record current dollar business sales.
Inflation adjusted business sales had remained in a channel between 4% and 8% year-over-year growth between April 2011 and November 2011. In December, the year-over-year improvement was only 3.3%. Now the inflation adjusted growth is slightly above this channel – however, it is clear from the March Retail sales that growth will return to this channel with next month’s data release.
Using inflation adjustments, analysts can more clearly count the quantity of business transactions. Inflation adjusted data shows there are currently no signs of recession – But again the growth rate trend line has been deteriorating since the beginning of 2011.
Many analysts pay particular attention to inventories in this report. Inventories, expressed as a ratio to sales, contracted again slightly and remain well within the historical levels for past Marches. A unusual rise in this ratio would suggest the economy was contracting. As stated earlier, inventory-to-sales ratios are average compared to other Octobers.
Caveats On Business Sales
This data release is based on more complete data than the individual releases of retail sales, wholesale sales and manufacturing sales. Backward revisions are slight – and it is unusual that the revisions would cause a different interpretation of a trend analysis.
The wholesale sales portion of this index is showing remarkable year-over-year increases – and is outperforming all other economic benchmarks. The question is why? Econintersect guesses that outsourcing and moving imported products through wholesalers are creating “artificial” growth. The approximate year-over-year growth rates:
- manufacturing up about 11% (5% inflation adjusted)
- wholesale up about 11% (7% inflation adjusted)
- retail up about 6% (2% inflation adjusted)
Can the growth in wholesale sales be considered real growth when even the employment levels in this industry remain below pre-recession highs – or that real (inflation adjusted) manufacturing and retail sales growth are only one-third of wholesale?
The data in this series is not inflation adjusted by the Census Bureau – Econintersect adjusts using the appropriate BLS price indices relative to the three data series.
- CPI less shelter for retail sales
- PPI subindex OMFG for manufacturing
- PPI subindex PCUAWHLTRAWHLTR for wholesale sales
As in most US Census reports, Econintersect questions the seasonal adjustment methodology used and provides an alternate analysis. The issue is that the exceptionally large recession and subsequent economic roller coaster has caused data distortions that become exaggerated when the seasonal adjustment methodology uses more than one year’s data. Further, Econintersect believes there is a New Normal seasonality and using data prior to the end of the recession for seasonal analysis could provide the wrong conclusion.