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U.S. Business Inventories Show Modest Decrease In April

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Business inventories in the U.S. saw a modest decrease in the month of April, according to a report released by the Commerce Department on Tuesday.

The report said business inventories slipped by 0.2 percent in April after inching up by a downwardly revised 0.2 percent in March.

Economists had expected business inventories to edge down by 0.1 percent compared to the 0.3 percent uptick originally reported for the previous month.

The modest decrease in business inventories came as retail inventories plunged by 1.8 percent in April after tumbling by 1.4 percent in May.

The steep drop in retail inventories more than offset increases in wholesale and manufacturing inventories, which rose by 0.8 percent and 0.3 percent, respectively.

"Headline inventories were just shy of their pre-Covid level in April, but they remain very lean relative to sales," said Oren Klachkin, Lead U.S. Economist at Oxford Economics.

Meanwhile, the Commerce Department said business sales climbed by 0.6 percent in April after soaring by 5.8 percent in April.

Wholesale sales advanced by 0.8 percent, while retail and manufacturing sales climbed by 0.5 percent and 0.4 percent, respectively.

With inventories falling and sales rising, the total business inventories/sales ratio edged down to 1.25 in April from 1.26 in March.

"Looking ahead, hearty consumer spending, rising business investment, and reviving global demand will give businesses ample reasons to continue restocking their inventories," Klachkin said.

He added, "Labor constraints, shipping delays, and high input costs will constrain inventory gains, but we look for those challenges to ease as better health conditions and reopenings bring the supply side of the economy back online."

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