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Economy in Brief

U.S. Wholesale Inventory Growth Outpaces Sales in May
by Tom Moeller  July 9, 2021

• Strength in inventories remains broad-based.

• May's sales increase follows two months of strength.

• I/S ratio edges higher.

Wholesale inventories increased 1.3% (8.2% y/y) during May after rising 1.1% in April, revised from 0.8%. A 1.1% gain had been expected in the Informa Global Markets Survey.

Durable goods inventories rose 1.2% (5.2% y/y) following April's 0.7% gain. Lumber & other construction materials led the gain with a 7.6% rise (33.8% y/y). It was followed by a 2.4% increase (14.7% y/y) in furniture & home furnishings, which marked the fourth consecutive month of strong gain. Metals inventories also rose 2.4% (3.3% y/y), the fifth straight month of strength while hardware inventories gained 1.5% (16.0% y/y), also the fifth consecutive month of strength. Motor vehicle inventories rose 1.2% (3.3% y/y) after a 0.9% April gain. Electrical equipment inventories rose 0.9% (5.9% y/y), about as they did in the prior two months. Computer inventories edged 0.3% higher (7.8% y/y) after falling 1.4% in April. Nondurables inventories rose 1.5% (12.7% y/y) in May after three straight months of strong increase. A 2.4% increase (7.4% y/y) in grocery products was accompanied by a 2.3% rise (13.7% y/y) in drug store inventories. The value of chemical inventories improved 0.9% (1.8% y/y), the sixth straight month of strong increase. Petroleum inventories rose 0.7% (49.3% y/y). To the downside were apparel inventories which eased 0.1% (-17.0% y/y) after a 4.4% decline.

Wholesale sales increased 0.8% in May (36.8% y/y) following a 1.1% April rise, revised from 0.8%. A 0.9% increase was anticipated in the Action Economics Forecast Survey.

Durable goods sales increased 1.7% (34.8% y/y) following a 2.4% April gain, revised from 2.1%. Metals sales surged 4.6% (90.3% y/y) after a 5.7% rise as prices strengthened. Electrical equipment purchases gained 1.9% (17.3% y/y) after a 4.2% jump in April. Lumber sales improved 4.9% (53.6% y/y) after strengthening 5.6%. Auto sales rose 1.1% (53.9% y/y) following a 0.4% improvement but furniture sales edged just 0.1% higher (32.6% y/y) after falling 1.5% in April. Sales of nondurable goods eased 0.1% (+38.7% y/y), the same as in April. A 2.9% decline (+90.0% y/y) in apparel sales followed two months of strong increase. Drug store sales fell 1.1% (+18.5% y/y). To the upside, chemical sales rose 1.7% (35.1% y/y), about as they did in May. Paper product sales improved 1.0% (20.0% y/y) following two straight months of roughly 2.2% increase. Petroleum sales rose 0.3% (148.8% y/y) after falling 4.0%.

With the rise in inventories outpacing sales, the inventory-to-sales ratio edged up to 1.23 in May. It nevertheless remained near the lowest since September 2014 and stood well below the record high of 1.67 set in April 2020. The durable goods I/S ratio fell to 1.48 in May, the lowest level since early-2012, while the nondurable goods I/S ratio edged up to 0.99 in May, but remained near the lowest level in two years.

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 (%) May Apr Mar May Y/Y 2020 2019 2018
Inventories 1.3 1.1 1.2 8.2 -1.7 1.4 6.2
Sales 0.8 1.1 4.3 36.8 -4.7 -0.2 6.7
I/S Ratio 1.23 1.22 1.22 1.56 (May '20) 1.38 1.35 1.28
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