The combined value of distributive trade sales and manufacturers' shipments for May rose by 0.7 percent (+/-0.1%) during May and by 5.7 percent (+/-0.2%) during the12 months ending in May. Manufacturing and Trade Sales is one of the four components of the Commerce Deparment's Composite Index of Coincident Economic Indicators. The year-over-year figure is well ahead of the 4.5 percent growth rate for all of 1995, and beats the growth rates of 4.24 and 5.66 logged in 1992 and 1993. In 1994, the rate was 7.87 percent; but, the Fed thought that was too rapid and slammed on the brakes by acting to raise short-term interest rates.

Durable goods sales and shipments were up 1.5 percent (+/-0.2%) for May and 6.8 percent for the preceding year. Nondurable goods remained virtually unchanged from April, but were up 4.7 percent from May 1995.

Manufacturers' and trade inventories decreased 0.1 percent (+/-0.1%) in May, following a 0.4 percent increase in April. Since May of 1995, inventories rose by 2.9 percent (+/-0.3%). The year-over-year change in inventories has been declining for 10 straight months, an indication of economic growth.

Inventories of durable and nondurable goods both decreased by 0.1 (+/-0.1) percent from April to May. On a year-over-year basis, durable and nondurable goods inventories increased by 3.2 percent and 2.4 percent, respectively.

The total business inventories/sales ratio was 1.37 at the end of May. The inventories/sales ratio represents the number of months, at the current sales rate, it would take to dispose of the currrent inventory. This indicator hit a near-term high of 1.40 back in January, and has been trending down since then.

Summing up: In the year ending in May, Manufacturing and Trade Sales grew at a rate that equaled or surpassed the growth in all but one of the four preceding calendar years. As a result of the pickup in sales, inventories and the inventories/sales ratio have both been trending down. So, in May, we obviously had an economic expansion going on.

Byline: Lafferty (MF Merlin)