Inventories Hold Steady, Indicating No Tariff Stress on Economy

U.S. business inventories were unchanged in May while sales dipped slightly, according to data released Tuesday by the Census Bureau. The figures suggest that the recent expansion of tariffs has not produced significant economic disruption, with firms showing no signs of precautionary stockpiling or supply chain stress.

Total inventories across manufacturers, wholesalers, and retailers remained flat at $2.66 trillion, following a 0.1 percent gain in April. Sales declined by 0.1 percent to $1.92 trillion, but were up 3.8 percent compared to May 2024. The inventory-to-sales ratio held steady at 1.38, slightly below the 1.40 level from a year earlier.

Inventory levels are often seen as a proxy for business sentiment around costs and supply conditions. May’s flat reading suggests that firms are managing stock levels cautiously, with no evidence of large-scale inventory accumulation in response to the tariffs announced by President Trump in April.

By sector, manufacturer inventories edged down 0.1 percent, retail inventories were flat, and wholesaler inventories rose 0.2 percent. Notably, retail inventories excluding autos—a category closely watched as a gauge of domestic demand and trade exposure—increased by 0.3 percent, even as overall retail sales fell slightly.

The auto sector showed signs of softening, with inventories and sales both declining by 0.8 percent. That drop accounted for most of the weakness in overall retail sales, which were down 0.2 percent.

Wholesalers continued to show strength, with year-over-year sales up 6.0 percent and inventories up 2.3 percent. Their inventory-to-sales ratio remained at 1.30, in line with historical norms and consistent with steady business-to-business demand.

The absence of a buildup in inventories, combined with stable inventory-to-sales ratios, points to a business sector that is not experiencing—or expecting—serious cost pressures or disruptions related to trade policy.

Import price data released earlier this month also showed declines, including a 1.6 percent year-over-year drop in nonfuel import prices from China. Those figures, along with subdued readings from the Consumer and Producer Price Indexes, suggest that tariff-related inflation pressures have not materialized.

The May inventory figures may have modest implications for second-quarter GDP. Inventories added significantly to GDP growth in the first quarter, but if May’s trend persists, the contribution to Q2 growth will likely be smaller.