US: Wholesale Trade

Fri Sep 08 09:00:00 CDT 2017

Consensus Consensus Range Actual Previous Revised
Inventories - M/M change 0.4% 0.2% to 0.4% 0.6% 0.7% 0.6%

Wholesalers have been stockpiling goods in what is probably a sign of confidence. Inventories in the group rose 0.6 percent for a second straight month with July's data showing big builds for electrical goods, metals, and machinery which all point to confidence in business investment and construction. But wholesalers did ease their build of vehicles in what may be another signal of doubts in the auto sector. The build among wholesalers is well beyond current sales which edged 0.1 percent lower in July to lift the inventory-to-sales ratio to 1.30 from 1.29.

Today's report points to a gain for next week's business inventories report which will also include factory inventories, where early July indications point to a build, and also retail inventories where the advance reading showed a small draw. Inventories were neutral for second-quarter GDP and a build in July would get the third quarter off to a good start.

Market Consensus Before Announcement
Wholesale trade inventories are expected to rise 0.4 percent, matching July's advance estimate. Wholesalers, after keeping their inventories down early in the year, began to restock, and significantly, in April.

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.