Econintersect's analysis of final business sales data (retail plus wholesale plus manufacturing) shows a slowing in the rate of growth. Inventory levels are very high and do not correlate to times of economic expansion.

Analyst Opinion of Business Sales and Inventories

Inventories remain elevated this month. Our primary monitoring tool - the 3 month rolling averages for sales - significantly declined this month but remains in expansion. As the monthly data has significant variation, the 3 month averages are the way to view this series. Overall business sales are improving since the low point in 2015 - but the trend in the last 6 months has been declining.

Econintersect Analysis:

• unadjusted sales rate of growth decelerated 1.9 % month-over-month, and up 6.0 % year-over-year
• unadjusted sales (but inflation adjusted) up 3.2 % year-over-year
• unadjusted sales three month rolling average compared to the rolling average 1 year ago decelerated 0.8 % month-over-month, and is up 6.1 % year-over-year.

• unadjusted business inventories growth rate accelerated 0.4 % month-over-month (up 4.3 % year-over-year with the three month rolling averages showing inventory growth now growing), and the inventory-to-sales ratio is 1.50 which is elevated for this month in times of economic growth).

US Census Headlines:

• seasonally adjusted sales down 0.2 % month-over-month, up 5.7 % year-over-year.
• seasonally adjusted inventories were up 0.6 % month-over-month (up 3.7 % year-over-year), inventory-to-sales ratios were up from 1.37 one year ago - and are now 1.34.
• market expectations (from Bloomberg / Econoday) were for inventory growth of 0.3 % to 0.7 % (consensus +0.6 %).

The way data is released, differences between the business releases pumped out by the U.S. Census Bureau are not easy to understand with a quick reading. The entire story does not come together until the Business Sales Report (this report) comes out. At this point, a coherent and complete business contribution to the economy can be understood.

Today, Econintersect analyzed advance retail sales for March 2018. This is finaldata from the Census Bureau for February 2018 for manufacturing, wholesale, and retail (see graphs below):

Year-over-Year Change Manufacturing New Orders - Unadjusted (blue line) and Inflation Adjusted (red line)

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Business Sales - Unadjusted - $ millions

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Year-over-year sales have been bouncing around the zero growth line for over one year - but now seem to be in an improvement cycle.

Year-over-Year Change Business Sales - Unadjusted (blue line) and Inflation Adjusted (red line)

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Using inflation adjustments, analysts can more clearly count the quantity of business transactions.

Many analysts pay particular attention to inventories in this report. Inventories, expressed as a ratio to sales. The current situation suggest the economy was contracting as inventories are growing.

Seasonally Adjusted Business Inventories Year-over-Year Change - Inventory Value (blue line, left axis) and Inventory-to-Sales Ratio (red line, right axis)

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The takeaway from the above graph is that overall inventories rate of growth is flat. The above graph is the headline view of inventories. Econintersect uses unadjusted data to look at inventories. The graph below shows the growth or contraction of the inventory-to-sales ratio year-over-year. When the graph below is above zero, inventories are building faster than sales.

Unadjusted Inventory-to-Sales Year-over-Year Change

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Caveats On Business Sales

This data release is based on more complete data than the individual releases of retail sales, wholesale sales and manufacturing sales. Backward revisions are slight - and it is unusual that the revisions would cause a different interpretation of a trend analysis.

The data in this series is not inflation adjusted by the Census Bureau - Econintersectadjusts using the appropriate BLS price indices relative to the three data series.

• CPI less shelter for retail sales
• PPI subindex OMFG for manufacturing
• PPI subindex PCUAWHLTRAWHLTR for wholesale sales

As in most US Census reports, Econintersect questions the seasonal adjustment methodology used and provides an alternate analysis. The issue is that the exceptionally large recession and subsequent economic roller coaster has caused data distortions that become exaggerated when the seasonal adjustment methodology uses more than one year's data. Further, Econintersect believes there is a New Normal seasonality and using data prior to the end of the recession for seasonal analysis could provide the wrong conclusion.