Signals of Tightening in Supply Chain for U.S. Businesses

Businesses increased inventories 0.4 percent in November, but sales grew roughly three times that pace, climbing 1.2 percent. The ratio of inventories to sales continued its recent trend decline.

Giddy Up Jingle Horse

• The tell-tale signs of strong holiday sales are evident in today’s business inventories report for November. Inventories fell at clothing shops and department stores and even at stores that sell home furnishings and the big box building supply and garden centers. The store shelves were picked clean as each of those store categories also reported monthly increases in sales.
• The overall inventory-to-sales (I/S) ratio fell again. 

More Inventory Building Justified

• The strength was not limited to the retail sector, as evidenced by the continued downward trend in I/S ratios for the wholesale and the factory sector.
• The survey data have been signaling a pick-up in orders and delays in delivery times and not enough inventories at suppliers; this confirms it and suggests scope for inventories to keep growing at a steady pace in 2018. 

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