US: Wholesale Trade


Thu Sep 10 09:00:00 CDT 2015

Consensus Consensus Range Actual Previous Revised
Inventories - M/M change 0.3% 0.1% to 1.3% -0.1% 0.9% 0.7%

Highlights
Factory inventories held stable in July as did wholesale inventories, down 0.1 percent against a 0.3 percent decline in sales that leaves the stock-to-sales ratio unchanged at 1.30. Wholesale inventories look light for machinery and apparel but heavy for farm products and metals.

The nation's inventories are heavier than they were last year which may limit future production and hiring. Next data on inventories will be the business inventories report on Tuesday.

Market Consensus Before Announcement
Concerns of an inventory overhang are centered in wholesale where wholesale inventories are expected to rise 0.3 percent in July following a June surge of 0.9 percent. The stock-to-sales ratio in the wholesale sector has been on a climb, to 1.30 in June from 1.19 in June last year.

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.