US: Wholesale Trade

Wed Jan 10 09:00:00 CST 2018

Consensus Consensus Range Actual Previous Revised
Inventories - M/M change 0.7% 0.6% to 0.7% 0.8% -0.5% -0.4%

Economic demand is strong and inventories are on the rise. Wholesale inventories jumped 0.8 percent in November which is one of the biggest builds of the last year and 1 tenth above the advance estimate. Yet further stocking looks likely given the strength of November sales at the wholesale sector which surged 1.5 percent following a 0.8 percent rise in October, a month when inventories fell 0.4 percent. The need for inventory build is underscored by the year-on-year rates where sales are far in front at 9.8 percent vs only 4.0 percent for inventories. The stock-to-sales ratio for the sector is on the decline, down to 1.24 in November vs 1.25 and 1.26 in the two prior months. Watch for November's total inventory tally with business inventories on Friday.

Market Consensus Before Announcement
Wholesale trade inventories are expected to rise 0.7 percent in line with advance data which showed a 0.7 percent build. Inventories in general, including at the wholesale level, have been on an orderly climb in response to strong demand.

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.