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Economy in Brief

Wholesale Inventories Rise in September, I/S Ratio Unchanged
by Gerald D. Cohen  November 6, 2020

• Inventories increased 0.4% while sales ticked up 0.1% in September.

• Wholesale inventory-to-sales ratio unchanged at 1.31.

Wholesale inventories grew a greater-than-expected 0.4% in September (-3.9% year-over-year). The Informa Global Markets Survey anticipated a 0.1% contraction. Wholesale inventory swings can have a meaningful impact on GDP. In the latest GDP report, third quarter inventory rebuild added 6.62 percentage points (ppt) to GDP; however, that was small relative to the 25.27 ppt contribution from the jump in consumption.

Durable goods inventories rose 0.1% (-6.4% y/y) with automotive, the largest, declining 0.3% (-7.1% y/y). Electrical equipment, the second largest fell 0.5% (-4.2% y/y). Nondurables increased 0.7% (0.2% y/y). Drug inventories, which make up over a quarter of nondurable inventories, grew 1.6% (12.6% y/y). Groceries, the second largest category, decreased 0.4% (+2.3% y/y).

Wholesale sales edged up a smaller-than-expected 0.1% during September (-2.3% y/y). The Action Economics Forecast Survey anticipated a 1.1% rise. Durable goods sales increased 0.7% (0.2% y/y) as auto sales accelerated 3.5% (4.3% y/y). Nondurable wholesales decreased 0.5% (-4.7%) as petroleum products dropped 5.0% (-31.4% y/y), likely the result of a 6.5% decline in seasonally adjusted increase oil prices (-30.5% y/y).

The inventory-to-sales (I/S) ratio at the wholesale level was unchanged at 1.31 in September. After hitting a record 1.63 in April -- data goes back to 1980 -- it is back to pre-COVID-19 levels. The durable goods ratio declined to 1.60 from 1.61. the lowest in two years. Meanwhile, the nondurable I/S ratio remains elevated at 1.04, though down meaningfully from April's 1.22 record. The durable and nondurable series go back to 1992.

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 (%) Sep Aug Jul Sep Y/Y 2019 2018 2017
Inventories 0.4 0.5 -0.2 -3.9 1.7 6.5 3.0
Sales 0.1 1.2 4.8 -2.3 0.6 6.8 6.7
I/S Ratio 1.31 1.31 1.32 1.33 (Sep '19) 1.34 1.28 1.30
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