# Wholesale Trade Sales & Inventories January 2011

The Wholesale Trade Sales & Inventories monthly report shows wholesale sales increased 3.4% from last month, and inventories increased 1.1%. In December, wholesale inventories increased 1.3%. From this time last year, wholesale sales are up 15.4% and inventories have increased 11.9%.

Oil, petroleum wholesale sales increased 10.6% in a month and inventories were also driven by Food and Oil. In spite of good news for GDP, more alarming this metric implies we might be looking at an oil shock in the economy.

The above graph shows the deceleration in inventories during the Great Recession and a return to 2008 levels. This is good news. Businesses add to inventories when they believe their sales will increase, although sometimes they have not adjusted inventories to sales decreases, as we saw in 2008 (see sales/inventory ratio below).

Inventories have driven GDP growth, and Q4 2010 was gravely affected by a deceleration in inventories.

The inventory to sales ratio is 1.13, which is reasonably healthy, a sudden spike in the inventory to sales ratio implies either someone just is loading up on a large amount of inventory with the same amount of sales....or sales have dropped to the floor. Below is the graph of the monthly wholesale inventories to sales ratio, or $I/S$, provided by the Commerce Department.

This report only covers wholesale inventories, not all inventories, but a decline in any inventories implies less GDP growth in that area. Wholesale inventories are roughly a third of all inventories used in GDP calculations.

Regardless of boosting up GDP numbers, inventories have little to do with real demand in the economy, more an indicator of expected demand.

More details from the report:

Sales: The December preliminary estimate was revised upward \$2.7 billion or 0.7 percent. January sales of durable goods were up 2.3 percent (+/-0.9%) from last month and were up 14.5 percent (+/-1.4%) from a year ago. Compared to last month, sales of motor vehicle and motor vehicle parts and supplies were up 7.8 percent and sales of electrical and electronic goods were up 3.4 percent. Sales of nondurable goods were up 4.4 percent (+/-0.9%) from last month and were up 16.2 percent (+/-2.1%) from last year. Sales of petroleum and petroleum products were up 10.6 percent from last month and sales of farm product raw materials were up 5.7 percent.

Inventories: The December preliminary estimate was revised upward \$1.5 billion or 0.3 percent. End-of-month inventories of durable goods were up 1.1 percent (+/-0.5%) from last month and were up 9.4 percent (+/-1.6%) from last January. Inventories of computer and computer peripheral equipment and software were up 4.1 percent and inventories of hardware, and plumbing and heating equipment and supplies were up 2.4 percent from last month. End-of-month inventories of nondurable goods increased 1.2 percent (+/-0.9%) from December and were up 15.7 percent (+/-2.1%) compared to last January. Inventories of petroleum and petroleum products were up 3.5 percent from last month and inventories of grocery and related products were up 2.9 percent.