In order to maintain a healthy economy there must be a healthy balance between manufacturing (the creation of), inventory (the supply of) and demand (the sale of) goods through the market place. Current trend is toward lower inventories and an improving Inventory-to-Sales Ratio as the economy regains its footing.

The Empire State Manufacturing Index fell in November, but less than market expectations and indicates a strong expansion among New York based firms.

New Order rose modestly. However, this was the fourth consecutive month of expanded activity following declines in the previous 15 months.

Business Inventories are showing signs of catching up with the market demand while they declined for the thirteenth consecutive month. The prior month’s decline was revised to be slightly deeper.

As previously reported, manufacturers inventories decline by 1.0% while merchant wholesalers dropped by 0.9%.

Meanwhile, retailers' inventories rose 0.6%, its first increase in the past 14 months. Retail auto dealers saw their inventories surge by 3.8% as auto production was kept well above post "cash-for-clunkers" sales (when sales crashed). This should be partially reversed next month. Non-auto retailers reduced their inventories by 0.6%. Business inventories were a record 13.4% below their year ago level.

According to Steven Wood, Chief economist at Insight Economics this settling of inventories should reflect in a Q3 GEP close to 2.8% when it is reported on November 24th.

Retail Sales, Wood says “Rose by 1.4% in October, compared with market expectations for a 0.9% increase… Over the past year, retail sales have declined by 1.7%, its fourteenth consecutive year-on-year decline. However, they have increased at a 6.0% annualized rate over the past 3 months… indicating that consumers are continuing to spend, albeit cautiously, amid rising unemployment, stagnant income growth, and tight credit.”

On Another Note - Toll Brothers Inc., the largest US luxury homebuilder, has reported that orders surged 42 percent in their fiscal fourth quarter, cancellations slowed and revenue beat analysts’ estimates.