9/10/2014
By Jennifer Coombs

Wednesday morning we received a reading of wholesale trade among the sales and inventories held by merchant wholesalers for the month of July. Inventory growth in the wholesale sector proved much lower than expected, at 0.1% compared to economists’ forecast for +0.5%. However, this is actually good news given a very strong 0.7% increase in wholesale sales which pulled down the stock-to-sales ratio one notch to a very lean 1.16 from 1.17 in June. Low inventories are indicative of a need for restocking while strong sales point to strong demand from the retail sector – as noted in the ICSC-Goldman and Redbook reports yesterday. Wholesale inventories of farm products and computer equipment declined drastically in July, as did inventories of petroleum (oil) products. Inventories were building in apparel and drugs as well as autos where manufacturing output has been increasing to keep up with demand. We note that today’s report ought to lower the outlook for the business inventories report which is set to be released on Friday. Economists are presently looking for a 0.4% build in inventories. Lower contributions from inventories could lower GDP forecasts for the third quarter but, given the need for rebuilding, this should be viewed as a positive for production and employment.

Jennifer Coombs
Wall Street Strategies

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