US: Wholesale Trade


Fri Jul 10 09:00:00 CDT 2015

Consensus Consensus Range Actual Previous Revised
Inventories - M/M change 0.3% 0.2% to 0.5% 0.8% 0.4% 0.4%

Highlights
Wholesale inventories rose a sharp 0.8 percent in May, a much larger-than-expected gain but still in line, though just barely, with sales in the wholesale sector which rose 0.3 percent to keep the stock-to-sales ratio unchanged at a respectably lean 1.29. Inventories relative to sales fell for autos and paper products. Builds were posted in furniture, farm-products, and apparel.

Indications on second-quarter inventories have been favorable, showing balanced growth despite the overhang of the first quarter. Today's larger-than-expected build may bump up second-quarter GDP estimates slightly.

Market Consensus Before Announcement
Wholesale inventories looked heavy through the early part of the year but started to look leaner beginning in the spring when sales began to pick up. The Econoday consensus is calling for an incremental 0.3 percent rise for May's inventories.

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

Description
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.