The July 2010 Manufacturing and Trade Inventories and Sales report stated:
Sales. The U.S. Census Bureau announced today that the combined value of distributive trade sales and manufacturers’ shipments for July, adjusted for seasonal and trading-day differences but not for price changes, was estimated at $1,090.0 billion, up 0.7 percent (±0.2%) from June 2010, and up 9.2 percent (±0.5%) from July 2009.
Inventories. Manufacturers’ and trade inventories, adjusted for seasonal variations but not for price changes, were estimated at an end-of-month level of $1,375.7 billion, up 1.0 percent (±0.1%) from June 2010 and up 2.4 percent (±0.4%) from July 2009.
Inventories/Sales Ratio. The total business inventories/sales ratio based on seasonally adjusted data at the end of July was 1.26. The July 2009 ratio was 1.35.
Starting with inventories, the unadjusted data has a spiked increase. It could be a data anomaly, or it could be a warning that sales are lower than business anticipated causing inventory rise. I have been seeing inventory rises in other data, and I am watching this closely.
The detail for the data released by the government:
The real issue is whether the unadjusted data can confirm the MoM rise in business sales.
To When using unadjusted data, you cannot simply compare the data MoM because of the seasonal movement of the data. So to understand MoM, I compare the previous months data against that month’s prior years data. The same is done for the current month. In this case the comparisons are:
|YoY change||June 2010||July 2010||Improving MoM?|
The July 2010 improved MoM when compared to 2005, 2006 and 2007. When compared to 2008 and 2009, July 2010 business sales were weaker. In other words, depending which years you use, the July 2010 data improved MoM or was weaker MoM. There is no clear improvement in the data.
Is the 2008 and 2009 business sales the new normal or simply data distorted as a result of a recession? Tune in next month.