Wholesale Inventories Stay on the Heavy Side

Wholesale inventories fell 0.1% in October, compared to no change for sales, keeping the stock-to-sales ratio for this sector unchanged at 1.31. This was below the Bloomberg consensus estimate of 0.2%.

Currently, wholesale inventories are on the heavy side as this ratio is well up from 1.22 in the same period from last year. The stock-to-sales ratio for the sector generally on the rise. However, businesses have been working hard to keep their inventories in check as sales mostly have been soft.

Looking at the numbers year over year, inventories are up 3.6%, which is well ahead of a 3.7% decline for sales.

Inventory builds reflecting falling sales include metals and autos, though strong sales of the latter at the retail level point to a bounce back for related wholesale sales. Inventory draws reflecting rising sales include furniture, apparel and farm products.

Businesses including wholesalers watch their inventory levels carefully, limiting unwanted overhang as much as they can, especially when sales are slow. The decline in October inventories, together with a sizable three-tenth downward revision to September to plus 0.2%, may be negatives for third-quarter gross domestic product (GDP) but are positives for the production and employment outlooks.
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