The 0.3% U.S. April business inventory rise
The 0.3% U.S. April business inventory rise after a 0.1% (was flat) March drop slightly under-performed, with a 0.5% retail inventory increase that undershot the 0.6% advance indicator gain, after a 0.7% March drop. Analysts saw the already-reported gains of 0.3% for factories and 0.1% for wholesalers, with a wholesale gain that beat a flat advance figure. Analysts still assume a Q1 GDP growth boost to 2.4% from 2.2%, with a $2 B downward retail inventory bump and a $2 B trimming in consumption, but boosts of $8 B for net exports and $5 B for construction. Analysts expect Q2 GDP growth of 3.6%, with a $5 B Q2 inventory subtraction that follows a $4.6 B addition in Q1, leaving an assumed Q2 accumulation rate of a restrained $15 B. Inventories have remained lean since the 2015-16 petro-hit despite rapid growth in factory activity and exports, a boost from fiscal stimulus, and little evidence of capacity constraints. The inventory-to-sales (I/S) ratio sustained the March drop to 1.35 from 1.36 in January and February, leaving an erratic 2-year unwind of the 1.43 expansion-high in February of 2016. Analysts should see a strengthening pattern for inventories in 2018 as I/S ratios fall.