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Economy in Brief

Wholesale Inventories and Sales Fall in December
by Sandy Batten  February 7, 2020

Wholesale inventories edged down 0.2% m/m (+2.1% y/y) in December after an upwardly revised 0.1% m/m rise in November (initially -0.1% m/m). The Informa Global Markets Survey anticipated a 0.1% decline in December. For all of Q4, wholesale inventories fell 0.1% q/q but for all of 2019 they rose 2.1% y/y. Wholesale inventory swings can have a meaningful impact on GDP growth. In the first estimate of 2019 Q4 GDP, a sharp slowdown in inventory investment subtracted 1.1%-points from overall real GDP growth.

Durable goods inventories decreased 0.3% (+1.2% y/y) in December after a 0.5% decline in November. The December decline was widely spread across major categories and was led by a 1.2% m/m drop in inventories of computing equipment and a 1.1% m/m decline in metals inventories. Inventories of nondurable goods were unchanged in December from November (+3.7% y/y) with a 7.8% m/m jump in petroleum inventories offset by declines across most other categories.

Wholesale sales disappointed in December, falling 0.7% m/m (+0.5% y/y) against the Action Economics Forecast Survey expectation for a 0.1% m/m gain. And the originally reported 1.5% m/m gain in November was revised down to 0.9%. For Q4, sales fell 0.7% q/q but for all of 2019 they edged up 0.6% y/y.

Weaker durable goods sales were behind the overall December decline. Sales of durable goods slumped 1.9% m/m (-4.0% y/y). Of note, motor vehicle sales fell 4.1% m/m, machinery sales declined 3.6% m/m and sales of metals decreased 3.5% m/m. In contrast, sales of nondurable goods rose 0.4% m/m (+4.8% y/y) on top of a 1.3% m/m jump in November. Monthly increases were widely spread, led by 4.8% m/m jump in sales of chemicals.

The inventory-to-sales (I/S) ratio at the wholesale level was unchanged in December at an upwardly revised 1.36 (initially reported as 1.35 for November). The I/S ratio has been either 1.36 or 1.37 for the past eight months after having generally risen since the middle of 2018. The durable goods I/S ratio rose to 1.79 in December, its highest reading since the Great Recession in 2008-09. The December increase was led by jumps in the I/S ratio for motor vehicles and for machinery. The I/S ratio for nondurables goods slipped to 0.98 in December from 0.99.

The wholesale trade figures 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 (%) Dec Nov Oct Dec Y/Y 2019 2018 2017
Inventories -0.2 0.1 0.1 2.1 2.1 7.3 3.3
Sales -0.7 0.9 -0.9 0.5 0.6 6.7 6.7
I/S Ratio 1.36 1.36 1.37 1.34 (Dec '18) 1.36 1.29 1.30
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