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Economy in Brief

U.S. Wholesale Inventories Increase Modestly as Sales Jump
by Tom Moeller  November 9, 2017

Inventories at the wholesale level increased 0.3% during September (4.6% y/y) following a 0.8% August gain, revised from 0.9%. During the last three months, inventories have risen at a 7.5% annual rate, up from little change January through March.

Nondurable goods inventories rose 0.4% (2.9% y/y) paced by a 3.0% increase (4.7% y/y) in inventories of petroleum. Chemical inventories also strengthened 1.1% (3.1% y/y). These gains were accompanied by a 0.2% increase (-5.8% y/y) in apparel inventories and a 0.2% decline (+11.4% y/y) in farm product inventories. Durable goods inventories increased 0.3% (5.7% y/y) reflecting a 1.0% strengthening (11.1% y/y) in electrical equipment inventories. Machinery inventories rose 0.2% (+0.3% y/y). These increases were offset by a 2.5% decline (+7.7% y/y) in computer & related equipment inventories and a 0.3% easing (+7.8% y/y) in automotive inventories.

Sales at the wholesale level increased 1.3% (5.5% y/y), also led by the petroleum sector where sales strengthened 12.6% (29.9% y/y). A 1.0% rise had been expected in the Action Economics Forecast Survey.

Higher oil prices pumped up the gain in nondurable goods sales to 1.8% (4.7% y/y). Chemical sales also were strong showing a 1.7% rise (+5.2% y/y). Elsewhere in the nondurable goods sector, there was weakness. Paper & paper product sales fell 3.8% (-4.9% y/y), the largest of three straight monthly declines. Grocery product sales fell 1.5% (-1.1% y/y) and apparel sales eased 0.2% (-8.2% y/y). Sales of durable goods offset these declines with a 0.7% rise (6.2% y/y). It was led by a 3.4% increase (17.6% y/y) in metals sales and a 1.6% gain (7.6% y/y) in electrical equipment sales. Motor vehicle shipments rose 0.7% (0.0% y/y) while furniture sales declined 0.3% (-5.0% y/y), off for the seventh month this year.

The inventory-to-sales ratio at the wholesale level eased to 1.27, its lowest point since December 2014 and down from a February 2016 high of 1.36.

The I/S ratio in the nondurable goods sector declined to 0.95, down from the 2016 high of 1.03. It as led by a collapse in the petroleum sector where the ratio of 0.36 compared to a 2016 high of 0.54. The apparel I/S ratio fell to 2.04 from the February 2017 high of 2.17. The chemical sector's I/S ratio fell to 1.15 from the 2016 high of 1.26. The I/S ratio in the durable goods sector eased to 1.62 from 1.74 in January 2016. The machinery I/S ratio fell to 2.83 from a 2016 high of 3.16 and the motor vehicle ratio fell to 1.74 from a July 2016 high of 1.89. The electrical equipment I/S ratio eased to 1.00 versus the March 2015 high of 1.07.

The wholesale trade figures are available in Haver's USECON database. The Action Economic Survey results are contained in AS1REPNA.

Wholesale Sector - NAICS Classification (%) Sep Aug Jul Sep Y/Y 2016 2015 2014
Inventories 0.3 0.8 0.6 4.6 2.6 1.1 5.8
Sales 1.3 1.9 0.0 5.5 -0.4 -4.9 3.6
I/S Ratio 1.27 1.28 1.29 1.32 (Sep. '16) 1.33 1.32 1.21
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