January Wholesale Inventories

Updated 10-Mar-10 10:28 ET

Highlights

Wholesale inventories declined 0.2% in January after falling a downwardly revised 1.0% in December.
The consensus estimate called for an increase of 0.2%.
Total wholesale sales increased 1.3% in January after increasing 1.2% in December.
The inventory/sales ratio declined from 1.12 to 1.10.

The drop in inventories should not have been unexpected.
Strong growth in wholesale inventories in October and November were based upon the stockpiling of farm products. Sales growth in farm products quickly turned negative in December. At the same time, wholesalers immediately halted inventory expansion in these goods and decided to let sales slowly run off the existing inventory. As a result, farm inventories fell 7.7% in December and 4.5% in January.
With the exception of computer equipment, the inventory data were mostly in-line with previous trends. Computer equipment inventories declined 2.4% in January after posting a 5.1% increase in December. However, some of the drop can be attributed to sales growth, which increased at a healthy 0.9% rate.
The inventory/sales ratio is well below historical normal levels, and if firms want to have enough inventories to meet sales demands, a large-scale inventory expansion phase should come on-line shortly.

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	JAN	DEC	NOV	OCT	SEP
Inventories	-0.2%	-1.0%	1.6%	0.6%	-0.8%
Sales	1.3%	1.2%	3.6%	1.4%	1.3%
Inventory/Sales	1.10	1.12	1.14	1.17	1.17