July 2011 Business Sales Not Good But Not Recessionary

The headlines for June 2011 USA business sales say sales are up 0.7% month-over-month, and 12.0% year-over-year. Econintersect’s analysis shows sales down 0.9% month-over-month, and up an inflation adjusted 5.8% year-over-year.

Although Econintersect does not see this data as good, there are no recession indications in this data.

The way data is released, differences between the business releases pumped out by the US Census 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.

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

The headlines:

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 $1,197.7 billion, up 0.7 percent (±0.2%) from June 2011 and up 12.0 percent (±0.4%) from July 2010.

Inventories. Manufacturers’ and trade inventories, adjusted for seasonal variations but not for price changes, were estimated at an end-of-month level of $1,526.2 billion, up 0.4 percent (±0.1%) from June 2011 and up 10.6 percent (±0.4%) from July 2010.

Inventories/Sales Ratio. The total business inventories/sales ratio based on seasonally adjusted data at the end of July was 1.27. The July 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 US Census compares data over many years.

Inflation adjusted business sales have remained above 6% levels which have been seen since early 2010.  The July 2010 inflation adjusted data is showing a decline over June, however retail sales in August 2011 have already shown a significant rebound.

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

Most 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 Junes. A unusual rise in this ratio would suggest the economy was contracting.

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