The Wholesale Trade Sales & Inventories monthly report shows wholesale sales increased 1.9% from last month, but inventories dropped -0.2%. For the year, wholesale sales are up 12.2% and inventories have increased 8.4%.
October sales were revised up to 2.6%, wholesale inventories revised down to 1.7% September to October percentage changes.
Inventories have driven GDP growth and this is the first contraction since December 2009. On the other hand, the inventory to sales ratio is 1.15, 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 , provided by the Commerce Department.
Again, this is wholesale inventories, not all inventories, but a decline in any inventories implies less Q4 GDP growth in that area. Wholesale inventories are roughly a third of all inventories used in GDP calculations. That said, PCE in particular, has been estimated to come in at 4% growth at least.
More inventory numbers will be reported in business inventories and sales report released next week the manufacturing data. These reports give the other 2/3rds of inventories amount, so at that time we can get a good guestimate on inventories contribution to Q4 GDP.
Regardless of boosting up GDP numbers, inventories have little to do with demand in the economy, which are real sales.
Bottom line this is not the sky is falling economic report as some in the financial press are trying to imply. More it seems the financial press gets real fussy if the expected numbers don't match the reported ones. (Get over yourselves already).
More details from the report:
November sales of durable goods were up 1.7 percent (+/-0.7%) from last month and were up 12.6 percent (+/-1.4%) from a year ago. Compared to last month, sales of hardware, and plumbing and heating equipment and supplies were up 5.5 percent and sales of electrical and electronic goods were up 3.2 percent. Sales of nondurable goods were up 2.1 percent (+/-0.7%) from last month and were up 11.8 percent(+/-1.9%) from last year. Sales of petroleum and petroleum products were up 7.1 percent from last month and sales of drugs and druggists' sundries were up 3.1 percent.
End-of-month inventories of durable goods were up 0.3 percent (+/-0.5%)* from last month and were up 5.5 percent (+/-1.4%) from last November. Inventories of motor vehicle parts and supplies were up 1.9 percent, while inventories of computer and computer peripheral equipment and software were down 1.8 percent from last month. End-of-month inventories of nondurable goods decreased 0.9 percent (+/-0.5%) from October, but were up 12.7 percent (+/-2.6%) compared to last November. Inventories of farm product raw materials were down 6.8 percent from last month.