US: Wholesale Trade

Fri Jun 08 09:00:00 CDT 2018

Consensus Consensus Range Actual Previous Revised
Inventories - M/M change 0.1% 0.0% to 0.4% 0.1% 0.3% 0.2%

Inventories need to be built up in the wholesale sector in what may be soft news for GDP, where low inventory numbers are a negative, but very good news for production and employment. Wholesale inventories inched only 0.1 percent higher in April against, however, a 0.8 percent surge in sales. This mismatch pulls down the stocks-to-sales ratio to a very lean 1.28. Year-on-year rates confirm the imbalance with inventories up 5.8 percent against a 7.8 percent rise in sales.

The nation's businesses, wholesalers included, have been very conservative in their inventory manage, reflected not only in hard data like today's report but also anecdotal reports like ISM manufacturing where more and more of the respondents say inventories of finished goods are too low.

Market Consensus Before Announcement
Wholesale inventories are expected to rise 0.1 percent in April and roughly in line with the month's advance data which showed no change. Despite a flat April, inventories in this report have been trending higher in line with sales.

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.