US: Wholesale Trade

Fri Dec 08 09:00:00 CST 2017

Consensus Consensus Range Actual Previous Revised
Inventories - M/M change -0.1% -0.4% to 0.4% -0.5% 0.3% 0.1%

Inventories are getting off to a slow start in the fourth quarter as those at the wholesale level fell a sizable 0.5 percent in October. The draw reflects strong demand for autos where inventories fell 0.7 percent for a second straight month. Today's wholesale draw looks to outmatch a preliminary 0.1 percent build in factory inventories and a previously released 0.1 percent draw in retail inventories. Declining inventories are a negative for GDP but are in fact very welcome during a time of solid expansion, pointing to the need for restocking and gains for future production and employment.

Market Consensus Before Announcement
Wholesale trade inventories are expected to fall 0.1 percent following a decline in October's advance reading. Wholesale inventories had been climbing sharply in prior months.

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.