Are Wholesale Inventories Being Built Up for Stronger Demand Ahead?

Another economic report has been released, but this data goes back to September. Wholesale inventories rose 0.5% in September to $448 billion, higher than the 0.1% expected by Bloomberg and above all estimates from the economist range of 0.0% to 0.3%. The report from the U.S. Department of Commerce showed that the preliminary reading for August of 0.1% was revised higher to 0.3%.

What stands out here is that on the surface this could be enough to slightly impact the revision for third-quarter gross domestic product (GDP). After all, August was revised higher and September was even higher, as well as above all expectations. Then after looking closer at the data it seems that the figures just did not come in off estimates to make much change in the GDP figures.

Another observation was that the build actually may be an intentional build-up to deal with demand ahead. That is, as sales rose 0.5% and it kept the stock-to-sales ratio at 1.31.

There also were shown to be lower inventories after strong sales in computer and computer peripheral equipment and software were up 3.8% from last month. Sales of electrical and electronic goods were up 2.8%, and sales of nondurable goods were up 0.3% from August but were down 6.7% from last September.

Sales of drugs and druggists’ sundries were up 1.7% from last month, but sales of petroleum and petroleum products were down by 4.6%.

If you back out autos, the numbers get more interesting. Auto inventories rose 2.3%, with retailers keeping up with strong demand from consumers. The inventory-to-sales ratio sans autos was unchanged at 1.27.

All in all, the report may not alter preliminary GDP targets that already had been reported for the third quarter. There are two revisions coming for third-quarter GDP.

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