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Economy in Brief

Wholesale Inventories Rise Less Than Sales in October, I/S Ratio Ticks Down
by Gerald D. Cohen  December 9, 2020

• Inventories increased 1.1%, while sales jumped 1.8% in October.

• Wholesale inventory-to-sales ratio edged down to 1.31.

Wholesale inventories grew a greater-than-expected 1.1% in October (-2.2% year-over-year). The Informa Global Markets Survey anticipated a 0.9% gain. Wholesale inventory swings can have a meaningful impact on GDP. In the latest GDP report, third quarter inventory rebuild added 6.55 percentage points (ppt) to GDP; however, that was small relative to the 25.22 ppt contribution from the jump in consumption.

Durable goods inventories rose 0.3% (-5.5% y/y) with automotive, the largest, declining 0.2% (-7.1% y/y). Electrical equipment, the second largest, increased 1.0% (-2.0% y/y). Nondurables jumped 2.5% (2.9% y/y). Drug inventories, which make up over a quarter of nondurable inventories, grew 3.9% (14.5% y/y). Groceries, the second largest category, gained 0.8% (1.8% y/y).

Wholesale sales jumped up a greater-than-expected 1.8% during October (0.9% y/y). The Action Economics Forecast Survey anticipated a 0.5% rise. Durable goods sales increased 2.0% (4.1% y/y) as auto sales accelerated 5.3% (13.3% y/y). Nondurable wholesales gained 1.7% (-2.0%) as petroleum products rose 3.6% (-28.2% y/y), partly the result of a 1.5% increase in seasonally adjusted oil prices (-26.9% y/y).

The inventory-to-sales (I/S) ratio at the wholesale level ticked down to 1.31 in October from 1.32. 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 1.57 from 1.59 the lowest in over two years. Meanwhile, the nondurable I/S ratio remains was unchanged at 1.05, 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 (%) Oct Sep Aug Oct Y/Y 2019 2018 2017
Inventories 1.1 0.9 0.5 -2.2 1.7 6.5 3.0
Sales 1.8 0.4 1.2 0.9 0.6 6.8 6.7
I/S Ratio 1.31 1.32 1.31 1.35 (Oct '19) 1.34 1.28 1.30
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