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Economy in Brief

Wholesale Inventories Grow While Sales Decline
by Gerald D. Cohen  December 7, 2018

Wholesale inventories increased 0.8% month-on-month (6.9% year-over-year) during October following an upwardly revised 0.7% gain in September. The advance report issued last week reported 0.7% growth in October, while the Informa Global Markets Survey expected a 0.3% rise.

Durable goods inventories increased 1.7% (9.3% y/y) in October after a 1.3% gain. Machinery inventories, the largest sector, grew 2.1% (11.7% y/y), while vehicles, the second largest, advanced 3.4% (8.1% y/y). Electrical equipment grew 0.9% (6.4% y/y). Inventories of nondurable goods declined 0.6% (+3.4% y/y) after edging down 0.2% in September. Drug inventories, which make up a quarter of nondurable inventories, rose 0.6% (4.0% y/y). Groceries, the second largest category, edged up 0.2% (-2.0% y/y). Miscellaneous nondurables increased 0.4 (2.2% y/y).

Wholesale sales declined 0.2% during October (+6.8% y/y) after inching up 0.1% (was 0.2%). The Action Economics Forecast Survey looked for 0.5% growth.

Durable goods sales inched down 0.1% (+6.8% y/y) after a 0.2% gain. Electrical equipment, the largest sector, declined 0.9% (+8.3% y/y). Professional and commercial equipment, which includes computers, advanced 1.5% (6.8% y/y), while vehicle sales fell 1.3% (unchanged y/y). Nondurable product sales decreased 0.3% (+6.8% y/y) after edging up 0.1%. Petroleum product sales, the largest category, increased just 0.5% (31.6% y/y) as oil price gains moderated in October. Drug sales grew 0.3% (5.5% y/y) while groceries gained 0.7% (-1.8% y/y).

The inventory-to-sales (I/S) ratio at the wholesale level rose to 1.28, the third increase in four months. The I/S ratio for durable goods jumped to 1.63 from 1.60, the highest level in over a year. The machinery ratio increased to 2.56 from 2.54, while motor vehicles surged to 1.69 from 1.62. The I/S ratio for nondurable goods was unchanged at 0.96. The petroleum industry I/S ratio fell to 0.35, a four-year low. The drug industry I/S remained at 1.06.

The wholesale trade figures and oil prices are available in Haver's USECON database. The expectations figure for inventories is contained in the MMSAMER database. Expectations for sales are in the AS1REPNA database.

Wholesale Sector - NAICS Classification (%) Oct Sep Aug Oct Y/Y 2017 2016 2015
Inventories 0.8 0.7 0.9 6.9 3.6 2.2 1.3
Sales -0.2 0.1 0.7 6.8 7.4 -1.3 -4.9
I/S Ratio 1.28 1.27 1.26 1.28 (Oct '17) 1.30 1.35 1.33
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