US: Wholesale Trade

Tue Jun 09 09:00:00 CDT 2015

Consensus Consensus Range Actual Previous Revised
Inventories - M/M change 0.3% 0.1% to 0.8% 0.4% 0.1% 0.2%

Inventories relative to sales lightened up in the wholesale sector during April with inventories up 0.4 percent but far below a giant 1.6 percent surge in sales. The stock-to-sales ratio edged down to 1.29 from 1.30. Autos, where sales have been strong, show a sizable decline in the stock-to-sales ratio as do farm products, furniture, computer equipment, and electrical goods. All these categories, like autos, show strong sales gains in the month.

Early indications on second-quarter inventories have been favorable with the risk of overhang, evident in the first quarter, now easing. Watch Thursday for the business inventories report which will round out related data for April.

Market Consensus Before Announcement
Wholesale inventories have been very heavy, the result of weak sales in the sector. Inventories are expected to rise another 0.3 percent in April.

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.