US: Wholesale Trade

Tue Aug 11 09:00:00 CDT 2015

Consensus Consensus Range Actual Previous Revised
Inventories - M/M change 0.4% 0.1% to 0.6% 0.9% 0.8% 0.6%

A build in auto inventories as well as for machinery drove wholesale inventories up a much higher-than-expected 0.9 percent in June. Sales at the wholesale level rose only 0.1 percent in the month, in turn driving the stock-to-sales ratio up 1 notch to a less-than-lean 1.30. This ratio was at 1.19 in June last year.

A rise in inventories relative to sales can be a negative signal for future employment and production, but the build in this case is centered in autos and machinery where final sales have been solid, especially for autos. Watch for the business inventories report, which will include data from the retail sector, on Thursday's calendar.

Market Consensus Before Announcement
Wholesale inventories are expected to ease to a 0.4 percent gain in data for June vs May's outsized gain of 0.8 percent. Inventories in the wholesale sector had look bloated earlier in the year but have since stabilized, with the stock-to-sales ratio steady in May at 1.29.

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.