US: Wholesale Trade

Thu Nov 09 09:00:00 CST 2017

Consensus Consensus Range Actual Previous Revised
Inventories - M/M change 0.3% 0.1% to 0.3% 0.3% 0.9% 0.8%

Wholesale trade inventories rose 0.3 percent in September, confirming the advance report and in line with consensus expectations of a slowdown to a more sustainable build pace following the outsized (though revised downward by a tick) 0.8 percent gain in the prior month. Dampening the overall inventory increase in September were autos, down 0.3 percent following August's exceptional 2.3 percent build, professional equipment, down 1.1 percent, and computer equipment, off 2.5 percent. Sales in the sector far outpaced inventory increases again and were up 1.3 percent after a 1.9 percent gain in August, which was upwardly revised by 0.2 percentage points. Sales gains were led by nondurable goods, up 1.8 percent primarily on the back of a 12.6 percent jump in petroleum sales, but there was also much strength hidden within the durable goods modest 0.7 percent gain, led by metals, which were up 3.4 percent. Autos saw a more modest 0.7 percent sales increase after surging 4.4 percent in August. Excluding autos, wholesale inventories were up 0.4 percent after a 0.7 percent rise in the prior month, and were again soundly outpaced by ex-auto sales, up 1.3 percent following a 1.7 percent increase in August. The stock-to-sales ratio fell a notch to 1.27, the lowest reading since December 2014 that continues the ratio's downward trend since the start of 2015 while ratcheting up pressures to increase production.

Market Consensus Before Announcement
Wholesale trade inventories are expected to rise 0.3 percent which is right in line with September's advance reading. Wholesalers have been building their inventories aggressively with 0.9 percent and 0.6 percent builds in the prior two reports.

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.