US: Wholesale Trade


Thu Jul 28 07:30:00 CDT 2016

Actual Previous
Inventories - M/M change 0.0% 0.1%

Highlights
Wholesales inventories are unchanged in the preliminary reading for June following a 0.1 percent gain in May. Retail inventories rose 0.5 percent in June vs 0.5 percent also in May. These builds are constructive, limited on the wholesale side with the retail build in line with what have been very strong results for retail sales. These results, together with this morning's data on goods trade, are part of the government's new "advance economic indicators report".

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.