Business Sales Strong in September 2010

Business sales remain strong in September 2010 – business sales are the combined sales volumes of manufacturing, wholesale and retail trades.  Business sales account for approximately 1/3 of the income money flows in the economy.  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 $1,101.0 billion, up 0.5 percent (±0.3%) from August 2010, and up 8.9 percent (±0.5%) from September 2009.

Inventories. Manufacturers’ and trade inventories, adjusted for seasonal variations but not for price changes, were estimated at an end-of-month level of $1,402.9 billion, up 0.9 percent (±0.1%) from August 2010 and up 6.3 percent (±0.4%) from September 2009.

Inventories/Sales Ratio. The total business inventories/sales ratio based on seasonally adjusted data at the end of September was 1.27. The September 2009 ratio was 1.30.

Econintersect evaluates using unadjusted data.

September sales are normally lower than August’s.  Even visually, it is clear that the drop in sales in September are not as bad as previous years.  There is little question that September sales are strong (although we have not recovered yet from the Great Recession).

However, the real question is inventory levels.  Rising inventory levels are a sure sign the economy is slowing.  We did have a big inventory rise in July 2010.

Historically, inventory begins rising in September, peaks in November, and falls in December.  The question is if this year’s rise is normal.

The average rise in inventory to sales ratios between August and September is 0.05 – and between August 2010 and September 2010 the ratio rose 0.04.  This means that inventories rose slightly less than normal MoM, and therefore there is no sign in inventory levels that the economy is slowing.

There is nothing in this data to suggest we are at recession’s door.  The data appears normal and strong for a September.