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Economy in Brief

Wholesale Inventories and Sales Rise
by Gerald D. Cohen  March 22, 2019

Wholesale inventories increased 1.2% month-on-month (7.7% year-over-year) during January following a 1.1% gain in December (this report was delayed as a result of the government shutdown). The Informa Global Markets Survey expected a 0.2% rise. Wholesale inventory swings can have a meaningful impact on GDP. In the second and third quarters of 2018 changes in inventories subtracted 1.2 percentage points and then added 2.3 ppt respectively. In Q4, inventories provided just a 0.1 percentage point boost.

Durable goods inventories increased 0.9% (11.7% y/y) in January after a 1.7% gain. Machinery inventories, the largest sector, grew 1.0% (13.7% y/y), while vehicles, the second largest, advanced 1.4% (9.5% y/y). Electrical equipment was up 3.0% (9.8% y/y). Inventories of nondurable goods gained 1.6% (1.8% y/y) after edging up 0.1% in December. Drug inventories, which make up a quarter of nondurable inventories, rose 1.3% (-2.7% y/y). Groceries, the second largest category, ticked up 0.2% (1.8% y/y). Miscellaneous nondurables increased 1.3% (7.6% y/y).

Wholesale sales grew 0.5% during January (2.7% y/y) after a 0.9% drop. The Action Economics Forecast Survey looked for a 0.4% gain.

Durable goods sales were unchanged (4.7% y/y) after a 0.6% increase. Electrical equipment, the largest sector, fell 2.1% (+2.7% y/y). Professional and commercial equipment, which includes computers, declined 0.5% (+0.6% y/y). These decreases were somewhat offset by a 2.5% jump in wholesale vehicle sales (3.3% y/y). Nondurable product sales rose 0.9% (0.9% y/y) after dropping 2.3%. Petroleum products increased 1.1% after 10.9% drop in December (-6.2% y/y). Oil prices fell at end of last year, but have slowly increased since. Drug sales, which are now the largest category as a result of the decline in petroleum prices, grew 0.6% (4.9% y/y) while groceries gained 1.0% (3.8% y/y).

The inventory-to-sales (I/S) ratio at the wholesale level rose to 1.34, the fifth consecutive gain. The I/S ratio for durable goods increased to 1.69, the highest level in two-and-a-half years. The machinery ratio grew to 2.66 while motor vehicles declined to 1.70. The I/S ratio for nondurable goods increased to 1.0. The petroleum industry I/S ratio picked up to 0.41 after reaching a four-year low of 0.35 in November. The drug industry I/S rose to 1.05 after hitting a five-and-a-half-year low of 1.04 in December.

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 (%) Jan Dec Nov Y/Y 2018 2017 2016
Inventories 1.2 1.1 0.4 7.7 7.3 3.4 2.2
Sales 0.5 -0.9 -1.2 2.7 7.2 7.4 -1.3
I/S Ratio 1.34 1.33 1.30 1.28 (Jan '18) 1.28 1.29 1.35
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