US: Wholesale Trade

February 9, 2017 09:00 CST

Consensus Consensus Range Actual Previous
Inventories - M/M change 1.0% 0.3% to 1.0% 1.0% 1.0%

Inventories have been on the climb raising the risk of unwanted overhang. But overhang isn't the story of the December wholesale trade report where a large 1.0 percent build is far outmatched by a 2.6 percent surge in sales. The results pull the stock-to-sales ratio down sharply to 1.29 from 1.31. Wholesale auto inventories rose 2.0 percent in December, a month that proved very strong for retail auto sales and was also very strong for wholesale sales where autos jumped 5.5 percent in the month. Watch for business inventories on Wednesday of next week's calendar which will wind up the year-end inventory picture.

Market Consensus Before Announcement
Wholesale inventories are to expected to rise a very sharp 1.0 percent in December, the same gain posted in the advance report. Inventories have been on the rise and pose the risk of slowing in future production and employment.

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.