US: Wholesale Trade

Wed May 09 09:00:00 CDT 2018

Consensus Consensus Range Actual Previous Revised
Inventories - M/M change 0.5% 0.5% to 0.6% 0.3% 1.0% 0.9%

Usually there's not much difference between the advance inventory estimate and the month's final, but there is in March. Wholesale inventories rose only 0.3 percent vs the advance gain of 0.5 percent. The build however is in line with sales which also rose 0.3 percent in the month to keep the stock-to-sales ratio unchanged at 1.26.

Wholesale inventories of autos fell 0.2 percent in a draw that is a plus for auto production. Year-on-year, inventories look lean at a 5.5 percent build which is below a 7.3 percent rise in wholesale sales. Watch for business inventories next week that will follow Tuesday's retail sales report.

Market Consensus Before Announcement
Wholesale trade inventories are expected to rise a sizable 0.5 percent in March in line with previously released advance data for the month. This would follow very strong builds of 1.0 and 0.9 percent in the two 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.