Inventories at the wholesale level continue to climb relative to sales to indicate an unwanted build for this key sector. Inventories at the wholesale level jumped 0.7 percent in July against a 0.1 percent decline for wholesale sales. This is the third straight decline for wholesale sales. The inventory-to-sales ratio for the sector is up for a third straight month, to 1.21 which the highest level of the recovery.
Details for the wholesale sector show inventory builds for two key capital goods groups, professional equipment and machinery. Sales at the wholesale level for these two groups have been trending lower making for rising inventory-to-sales ratios and pointing to weakness in business investment. Inventories for autos also rose in the month but the gain for sales was stronger. Note that unit data for August auto sales point, in general contrast to other components, for the need to rebuild inventories.
Factory inventories, which were previously released, rose 0.5 percent in July which together with today's report point to an early build for third-quarter inventories. Data on retail inventories, where the trend like in the wholesale sector has also been showing an unwanted build, will be posted Friday in the business inventories report.
Market Consensus before announcement
Wholesale inventories in June dipped 0.2 percent. But wholesale sales fell 1.4 percent. This mismatch put the inventory-to-sales ratio for the sector at 1.20 which was well up from 1.18 in May and was the highest reading since December 2009. The build in wholesale inventories was centered in durable components including hardware, machinery, and computers.