Business Inventories Rise 0.9%, Suggesting Stronger Growth Ahead
Sales rose 0.5% to a $1.1 trillion annual rate, and are now up 8.9% compared to September 2009, an improvement from the 8.2% year-over-year increase recorded in August. However, economists are careful to point out that current year-over-year sales increases stem from a low base as a result of the recession, which makes large percentage gains easier to achieve.
Meanwhile, the inventory-to-sales ratio remained the same in September at 1.27, which translates into a 1.27-month supply of goods at the current sales pace. The ratio, an indicator of demand, was at 1.30 in September 2009.
The Expansion Has Legs
September's business inventory report provides more support for the economic bulls, who argue that the economic expansion has only just begun.
All other factors being equal, September's stronger than expected inventory build-up should lead to an upward revision of the initially-estimated 2% U.S. GDP growth rate in the third quarter. The U.S. economy is not firing on all cylinders yet, but it's growing, and the "better business conditions story" continues incrementally to be written.