US: Wholesale Trade


Fri Oct 07 09:00:00 CDT 2016

Actual Previous
Inventories - M/M change -0.2% -0.1%

Highlights
The nation's inventories, thanks to tight management, are lean which may be a negative for current GDP growth but is unquestionably a positive for future growth and, more importantly, future employment growth. Wholesale inventories slipped 0.2 percent in August vs a preliminary decline of 0.1 percent and compared with a final decline in July which is also at 0.1 percent. August's draw comes at the same time that sales at the wholesale rose very sharply, up 0.7 percent to pull down the stock-to-sales ratio to 1.33 from 1.34.

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.