U.S. Business Inventory and Sales Update

Sales dipped slightly, while U.S. business inventory remained unchanged in May, according to Tuesday’s data from the Census Bureau. This suggests that the recent tariff expansions haven’t significantly disrupted the economy, as businesses seem to show no signs of supply chain stress or major precautions.

The total inventory across manufacturers, wholesalers, and retailers held steady at $2.66 trillion, following a 0.1% increase in April. Sales fell by 0.1% to $1.92 trillion, yet they did rise by 3.8% compared to May 2024. The stock-to-sales ratio stayed stable at 1.38, just under last year’s 1.40.

Inventory levels are often considered indicators of business sentiment related to costs and supply conditions. The unchanged figure for May implies that there’s no strong evidence of significant inventory build-up due to the tariffs introduced by President Trump in April, highlighting that companies are managing their stock levels judiciously.

Looking at specific sectors, manufacturer inventory saw a slight decline of 0.1%, retail inventory remained the same, and wholesaler inventory grew by 0.2%. Notably, retail stock—excluding automobiles, which are seen as a key indicator of domestic demand—increased by 0.3%, even though overall retail sales experienced a slight downturn.

The automotive sector exhibited some weakening, with both inventory and sales down by 0.8%. This decline contributed significantly to the overall 0.2% decrease in retail sales.

Wholesalers continue to demonstrate strength, with a year-on-year increase of 6.0% and a 2.3% rise in inventory. Their inventory-to-sales ratio remained at 1.30, aligning with historical averages, suggesting stable demand among businesses.

The lack of inventory accumulation, alongside a stable inventory-to-sales ratio, indicates that many sectors have neither faced nor expect major cost pressures or disruptions resulting from trade policies.

Earlier this month, import price data revealed a decrease, including a 1.6% drop in non-fuel import prices from China compared to the previous year. These figures, paired with cautious trends in consumer and producer price indices, imply that inflationary pressures from tariffs have not materialized.

The inventory figures for May might have a modest impact on second-quarter GDP. Inventory had a significant positive effect on GDP growth in the first quarter, but if the current trends continue, it may contribute less in the second quarter.