Once again the weather is at play as economists still have not figured out it was cold in January. Then again, perhaps something else is at play, such as the economy is cooling and the economists still don’t see it.

Yahoo!Finance reports U.S. Wholesale Inventories Rise, but Sales Drop Sharply.

U.S. wholesale inventories rose more than expected in January, as companies built up stocks of autos and machinery, though sales posted their largest decline in nearly five years.

The Commerce Department said on Tuesday wholesale inventories rose 0.6 percent to $521.2 billion after a revised 0.4 percent gain in December.

Economists polled by Reuters expected stocks of unsold goods at wholesalers to rise 0.4 percent in January.

Sales at wholesalers fell 1.9 percent in January, their biggest drop since March 2009, compared to a revised 0.1 percent increase the prior month. Economists had forecast sales to edge up 0.2 percent.

Sales of non-durable equipment such as petroleum and paper products dropped 3.2 percent, the sharpest fall since December 2008.

At January’s sales pace it would take 1.2 months to clear shelves, compared to December’s pace of 1.18 months.

Census Report on Wholesale Trade

Let’s go straight to the monthly Census Report on Wholesale Trade for a closer look.

Sales. The U.S. Census Bureau announced today that January 2014 sales of merchant wholesalers, except manufacturers’ sales branches and offices, after adjustment for seasonal variations and trading-day differences but not for price changes, were $432.6 billion, down 1.9 percent (+/- 0.5%) from the revised December level, but were up 3.9 percent (+/-1.2%) from the January 2013 level.

The December preliminary estimate was revised downward $1.4 billion or 0.3 percent. January sales of durable goods were down 0.4 percent (+/-0.7%)* from last month, but were up 3.9 percent (+/-1.2%) from a year ago. Sales of nondurable goods were down 3.2 percent (+/-0.5%) from December, but were up 3.9 percent (+/-1.8%) from last January. Sales of petroleum and petroleum products were down 7.5 percent from last month and sales of paper and paper products were down 2.9 percent.



The key inventory rise is in autos. But also note the year-over-year rise in durable goods in general, nearly across the board. Of course sales are up as well, but if a sales slump happens for any reason, inventories will be way out of line.

Is this all weather related? I suspect not.

Future reports will tell, but as is typically the case, some sort of snapback in the next report or two is expected.

Mike “Mish” Shedlock