US: Wholesale Trade

Tue Nov 10 09:00:00 CST 2015

Consensus Consensus Range Actual Previous Revised
Inventories - M/M change 0.1% 0.0% to 0.3% 0.5% 0.1% 0.3%

Wholesale inventories rose 0.5 percent in September following an upward revised 0.3 percent gain in August. The September build appears to be intentional based on a 0.5 percent rise in September sales that keeps the stock-to-sales ratio for wholesalers unchanged at 1.31.

Inventories of autos rose 2.3 percent as wholesalers try to keep up with what is very strong retail demand for autos. Excluding autos, the stock-to-sales wholesale ratio is unchanged at 1.27.

Inventory draws reflecting gains in sales include computer equipment, electrical goods, and apparel. Wholesale inventories of furniture rose on a swing lower for sales.

Inventories in general are heavy and businesses, waiting for a pick up in sales, are being careful to keep them in check. Today's results are in line with Commerce Department assumptions and should have little bearing on third-quarter GDP revisions. Watch Friday for the business inventories report which will include data from the retail sector.

Market Consensus Before Announcement
Wholesale inventories have been heavy with the stock-to-sales ratio for the sector on the rise. But businesses, including wholesalers, have been working hard to keep their inventories in check as sales have been soft. The Econoday forecast for wholesale inventories is calling for a small 0.1 percent rise.

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.