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Economy in Brief

Wholesale Inventories Decline as Sales Jump
by Gerald D. Cohen  January 10, 2020

Wholesale inventories edged down 0.1% in November (3.3% year-over-year), following an unrevised 0.1% gain in October. The Informa Global Markets Survey anticipated a 0.1% rise in November. Wholesale inventory swings can have a meaningful impact on GDP. In the second quarter inventories provided a 0.9 percentage point drag on GDP growth, while in the third quarter they had little impact.

Durable goods inventories decreased 0.3% (+3.4% y/y) in November after a 0.4% decline in October. Machinery inventories, the largest sector, were down 0.3% (6.2% y/y), while vehicles, the second largest, fell 1.1% (+4.9% y/y). Electrical equipment edged up 0.1% (3.0% y/y). Inventories of nondurable goods gained 0.3% (3.1% y/y) after rising 0.9% in October. Drug inventories, which make up a quarter of nondurable inventories, gained 1.1% (5.7% y/y). Groceries, the second largest category, were up 0.9% (4.3% y/y).

Wholesale sales rebounded 1.5% during November (0.8% y/y) more than making up for the 1% decline in the previous two months. The Action Economics Forecast Survey looked for a 0.4% gain in November.

Durable goods sales rose 0.9% (-1.1% y/y) after a 1.2% decrease. Electrical equipment, the largest sector, grew 1.0% (-2.9% y/y). Professional and commercial equipment, which includes computers, declined 1.1% (-0.7% y/y). Wholesale vehicle sales jumped 4.5% (3.0% y/y) after falling 5.0% in the prior two months. Nondurable product sales rose 2.0% (2.6% y/y) after a 0.6% loss. Petroleum products jumped 6.6% (3.2% y/y), likely the result of higher oil prices. Drug sales, which vie with petroleum to be the largest category of nondurable sales, were up 0.3% (4.5% y/y) while groceries gained 0.5% (4.6% y/y).

The inventory-to-sales (I/S) ratio at the wholesale level declined to 1.35 in November from 1.37. The I/S ratio has been range-bound during 2019 after rising during the second half of last year. The durable goods I/S ratio decreased to 1.76. Last month's reading of 1.78 was the highest since the end of the Great Recession. The motor vehicles ratio fell to 1.73 from last month's ten year high of 1.83. The I/S ratio for nondurable goods decreased to 0.97.

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 (%) Nov Oct Sep Nov Y/Y 2018 2017 2016
Inventories -0.1 0.1 -0.7 3.3 7.1 3.3 1.9
Sales 1.5 -0.9 -0.1 0.8 6.7 6.7 -1.3
I/S Ratio 1.35 1.37 1.36 1.32 (Nov '18) 1.29 1.30 1.35
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