Global| May 08 2020Wholesale Inventories Decline Despite Falling Sales
Summary
• Wholesale inventories decreased 0.8% in March, the third consecutive monthly contraction. • Inventory to sales ratio jumps as sales fall 5.2%. • While inventory swings can have a meaningful impact on GDP, in the current quarter they [...]
• Wholesale inventories decreased 0.8% in March, the third consecutive monthly contraction.
• Inventory to sales ratio jumps as sales fall 5.2%.
• While inventory swings can have a meaningful impact on GDP, in the current quarter they will be overwhelmed by shifts in demand.
Wholesale inventories declined 0.8% in March (-2.0% year-over-year), the third consecutive monthly decrease. The Informa Global Markets Survey anticipated a 1.0% contraction. Wholesale inventory swings can have a meaningful impact on GDP. First quarter inventories provided a 0.53 percentage point drag on GDP growth, while in the 2019q4 they had little impact. In the current quarter any inventory swings will be overwhelmed by shifts in the final sales components such as consumption and investment.
The 0.5% increase in durable goods inventories (-1.7% y/y) was more than offset by a 2.7% drop nondurable goods (-2.4% y/y). Drug inventories, which make up a quarter of nondurable inventories, fell 2.3% (+2.7% y/y). Groceries, the second largest category, declined 0.8% (+5.3% y/y).
Wholesale sales fell 5.2% during March (-5.2% y/y) slightly more than the 5.0% drop anticipated by Action Economics Forecast Survey. Durable goods sales dived 5.5% (-5.9) driven by a 14.3% reversal in autos (-11.4% y/y). Nondurable whole sales contracted 4.9% (-4.6%) as petroleum products plummeted 26.1% (-29.3% y/y) likely the result of falling oil prices. Interestingly, grocery wholesale sales decreased 1.4% in March (+0.8% y/y). Perhaps the drop in restaurant wholesale demand was larger than the increase coming from consumer stores.
The inventory-to-sales (I/S) ratio at the wholesale level jumped to a four-year high of 1.37 in March. The durable goods I/S ratio increased to 1.77, a level last seen in the 2009, during the Great Recession.. The I/S ratio for nondurable goods rose to 1.01.
The wholesale trade figures and oil prices are available in Haver's USECON database. The expectations figure for inventories is contained in the MMSAMER database. Expectations for sales are in the AS1REPNA database.
| Wholesale Sector - NAICS Classification (%) | Mar | Feb | Jan | Mar Y/Y | 2019 | 2018 | 2017 |
|---|---|---|---|---|---|---|---|
| Inventories | -0.8 | -0.7 | -0.6 | -2.0 | 1.7 | 6.5 | 3.0 |
| Sales | -5.2 | -0.7 | 1.3 | -5.2 | 0.6 | 6.8 | 6.7 |
| I/S Ratio | 1.37 | 1.31 | 1.31 | 1.33 (Mar '19) | 1.34 | 1.28 | 1.30 |
Gerald D. Cohen
AuthorMore in Author Profile »Gerald Cohen provides strategic vision and leadership of the translational economic research and policy initiatives at the Kenan Institute of Private Enterprise.
He has worked in both the public and private sectors focusing on the intersection between financial markets and economic fundamentals. He was a Senior Economist at Haver Analytics from January 2019 to February 2021. During the Obama Administration Gerald was Deputy Assistant Secretary for Macroeconomic Analysis at the U.S. Department of Treasury where he helped formulate and evaluate the impact of policy proposals on the U.S. economy. Prior to Treasury, he co-managed a global macro fund at Ziff Brothers Investments.
Gerald holds a bachelor’s of science from the Massachusetts Institute of Technology and a Ph.D. in Economics from Harvard University and is a contributing author to 30-Second Money as well as a co-author of Political Cycles and the Macroeconomy.
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