Businesses continued to brace for the imposition of tariffs, with total inventories increasing by 0.2% in February after rising by 0.6% in January.
While pulling forward purchases will add to overall economic growth in the first quarter, the experience will lead to a retrenchment in inventories and a drop in gross domestic product in later quarters.
Read more of RSM’s insights on the economy and the middle market.
Wholesale inventories increased in February by 0.3% after January’s increase of 0.8%, Inventories of industrials increased by 0.1% on the month. Retail inventories increased by 0.1% on the month after little change in January.
Inventory-sales ratios
The ratios of Inventories to sales give a more standardized view of inventory accumulation.
Most notably, inventory-sales ratios for wholesalers of durable goods continued to increase in February. There were significant or notable increases in the inventory-sales ratios for wholesalers of:
- lumber and construction equipment
- furniture and home furnishings
- machinery and equipment supplies
- computers and peripheral equipment
- motor vehicle parts
The inventory-sales ratio for wholesalers of most nondurable goods remained near or below average, with alcoholic beverages the exception. Retail inventory-sales ratios remained below average.
For consumers, the tariffs on Canada’s exports of lumber and construction equipment to the United States will add to house prices, which comprise the largest portion of the consumer price index.
