September Wholesale Inventories
Updated 19-Nov-09 19:27 ET
Highlights
- Wholesale inventories fell 0.9% in September compared to the previous month, slightly above the consensus estimate of -1.0%. Inventories fell 1.3% in August.
- Both durable and nondurable good wholesalers inventories declined 0.9%.
- The automotive sector inventories increase 0.3% as manufacturing deliveries are making up for the drop-off in sales following Cash for Clunkers.
- Wholesale sales increased 0.7% after increasing 1.1% in August. Sales were hampered by the pullback in motor vehicle sales. Excluding automotive products, wholesale sales rose almost 1.0%.
- The inventory-to-sales ratio fell to 1.18, slightly below the 1.20 ratio found in August. The ratio is now at the same level as in September 2008.
Key Factors
- The rate of decline in inventories is decreasing, which is why the change in inventories showed up as a positive contribution to GDP in Q3.
- We expect the decline in inventories to continue to moderate as expected consumer demand starts picking up through the economic recovery.
- Most economists continue to look at the inventory restocking cycle as the key component to sustainable GDP growth in 2010. Inventory growth, however, is not labor intensive and typical does not result in increased employment.
- Instead, the increase in future GDP will be more of a statistical aberration as the economy, and most importantly the consumer, continues its slow transition between recession and recovery.
We expect the inventory-to-sales ratio to continue to slide into the 1.10 to 1.15 range as sales continue to increase amid a declining inventories trend.
Big Picture
- Wholesale inventories are just one component of total business inventories. Manufacturing and retail inventories make up the rest of total business inventories. The market ignores this release and doesn't pay much attention to the full business inventory release that comes a few days later. Improved inventory management in recent years has reduced the economic swings associated with inventories and has helped produce a long-term downtrend in the inventory-to-sales ratio.
| Category |
SEP |
AUG |
JUL |
JUN |
MAY |
| Inventories |
-0.9% |
-1.3% |
-1.6% |
-2.1% |
-1.2% |
| Sales |
0.7% |
1.1% |
0.6% |
0.3% |
0.4% |
| Inventory/Sales |
1.18 |
1.20 |
1.23 |
1.25 |
1.28 |
