US: Wholesale Trade

Fri Jan 09 09:00:00 CST 2015

Consensus Consensus Range Actual Previous Revised
Inventories - M/M change 0.3% -0.3% to 0.7% 0.8% 0.4% 0.6%

Inventories look a bit heavy in the wholesale sector, up 0.8 percent in November vs a 0.3 percent decline in sales that lifts the stock-to-sales ratio to 1.21 from October's 1.20 and compared to 1.19 in September. Weak sales made for unwanted inventory builds in metals, chemicals, lumber, machinery and farm products.

The nation's inventories have been steady though today's report does hint at slowing demand going into year end. Watch for the final data on November inventories in Wednesday's business inventories report.

Market Consensus Before Announcement
Wholesale inventories held steady in October, up 0.4 percent versus a 0.2 rise in sales that left the stock-to-sales ratio unchanged for a third month at a lean and healthy 1.19. Details showed noticeable draws relative to sales for computer equipment, farm products, chemicals and furniture. Builds relative to sales are hard to find but do include drugs and miscellaneous nondurable goods.

Wholesale trade measures the dollar value of sales made and inventories held by merchant wholesalers. It is a component of business sales and inventories.

Investors need to monitor the economy closely because it usually dictates how various types of investments will perform. The stock market likes to see healthy economic growth because that translates to higher corporate profits. The bond market prefers a slower rate of growth that won't lead to inflationary pressures. Wholesale sales and inventory data give investors a chance to look below the surface of the visible consumer economy. Activity at the wholesale level can be a precursor for consumer trends. In particular, by looking at the ratio of inventories to sales, investors can see how fast production will grow in coming months. For example, if inventory growth lags sales growth, then manufacturers will need to boost production lest product shortages occur. On the other hand, if unintended inventory accumulation occurs (i.e. sales did not meet expectations), then production will probably have to slow while those inventories are worked down. In this manner, the inventory data provide a valuable forward-looking tool for tracking the economy.