September 2011 Business Sales Show Continuing Growth

Business sales continued to show moderate growth in September 2011.  Business sales combines manufacturing, wholesale and retail sales.

US Census Headlines:

  • sales up 0.6% month-over-month, up 11.6% year-over-year
  • inventories unchanged month-over-month, sales-to-inventory ratios up were 1.30 one year ago – and are now 1.27.

Econintersect Analysis:

  • sales down 2.4% month-over-month, and up 11.5% year-over-year
  • sales (inflation adjusted) down 2.1% month-over-month, up 5.9% year-over-year
  • inventories up 0.6% month-over-month, sales-to-inventory ratios 1.26 which is lower than the historical channel for this  month of the year (good:  inventories are not growing).

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.

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

The headlines:

Sales. The U.S. Census Bureau announced today that the combined value of distributive trade sales and manufacturers’ shipments for September, adjusted for seasonal and trading-day differences but not for price changes, was estimated at $1,209.7 billion, up 0.6 percent (±0.3%) from August 2011 and up 11.6 percent (±0.4%) from September 2010.

Inventories. Manufacturers’ and trade inventories, adjusted for seasonal variations but not for price changes, were estimated at an end-of-month level of $1,532.5 billion, virtually unchanged (±0.1%)* from August 2011 and up 9.0 percent (±0.3%) from September 2010.

Inventories/Sales Ratio. The total business inventories/sales ratio based on seasonally adjusted data at the end of September was 1.27. The September 2010 ratio was 1.30.

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.

In the new normal – August and September sales have been approximately equal.  In September 2011, there was noticeable “less good” business sales when compared to August 2011.

Inflation adjusted business sales were in a clear downward trend for most of 2011. They have now rebounded somewhat in August 2011 breaking the downward sloping trend line. As a new trend line is still not obvious, a new business sales trend line may be defined in the months to come.

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.  As stated earlier, inventory-to-sales ratios are very low (good) compared to other Septembers.

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 data in this series is not inflation adjusted – and Econintersect adjusts using the appropriate BLS price indices relative to the three data series.

As in most US Census reports, Econintersect does not agree with 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.

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