The 0.5% U.S. August business inventory rise
The 0.5% U.S. August business inventory rise after a 0.7% (was 0.6%) July gain tracked estimates, with a 0.7% retail inventory increase that matched the advance indicator gain. Analysts saw the already-reported 0.1% drop for factory inventories, and a 1.0% rise for wholesalers that beat a 0.8% advance figure. Analysts still expect GDP growth of 3.1% in both Q3 and Q4, after a 4.2% Q2 gain. Inventories and trade have gyrated sharply in 2018, and analysts expect the $67.2 B GDP inventory subtraction in Q2 to be followed by an $83 B addition in Q3 and a $22 B subtraction in Q4, leaving the accumulation rate back to a lean $25 B pace by the end of 2018. Inventories have stayed lean since the 2015-16 petro-hit despite rapid factory sector growth and exports, a boost from fiscal stimulus, and little evidence of capacity constraints or near-term upside inflation risk beyond a 2018 firming in goods prices. Analysts should see a strengthening inventory pattern into 2019 as I/S ratios fall. The inventory-to-sales (I/S) ratio in August sustained the July rise to 1.34 from 1.33 in June but the same 1.34 in May and a higher 1.35 in March and April, as analysts extend the erratic unwind of the 1.43 expansion-high in February of 2016.