Wholesale inventories plunged 5% in the Census Bureau Wholesale Trade Report for February, released today.
That’s not the worst of it. January was revised from +0.3% to -0.2%
From the perspective of the original January report, wholesale inventories were down 1%. That’s a crash.
Sales are no better.
The Bloomberg Econoday wholesale consensus estimate for inventories was -0.2% in a range of -0.6% to +0.4%.
I congratulate the economist who was actually thinking, while wondering which one predicted +0.4%.
Highlights
Wholesalers aggressively drew down their inventories in February, 0.5 percent lower following a revised 0.2 percent draw in January. Auto inventories were worked sharply lower in February, down 1.0 percent for the largest monthly decline since September 2013.
Sales in the wholesale sector fell 0.2 percent in the month for a 4th straight decline in a string that offers clear evidence of economic weakness. Yet the decline for inventories was greater than that for sales, making for an improvement in the stock-to-sales ratio which fell to a less heavy 1.36 from 1.37.
Auto sales have been struggling this year and the decline in wholesale auto inventories could be an early sign of correction for this industry. Still, draws are always welcome news when demand is soft. Note that today’s inventory decline and downward revision are negatives for first-quarter GDP estimates.
Recent History
Wholesale inventories have been rising only marginally but have still been well ahead of wholesale sales which have been falling. The stock-to-sales ratio in January rose two notches to 1.35 from 1.33 for the highest reading of the recovery, since April 2009. Forecasters see wholesale inventories turning lower in the February report, down a consensus 0.2 percent.
Inventory-to-Sales Improvement in Pictures
Inquiring minds no doubt wish to see what the wholesale inventor-to-sales improvement looks like.
Sales
Wholesale sales were an absolute disaster. That explain the insignificant but “welcome” improvement in the inventory-to-sales ratio above.
Sales Highlights
- Year-over-year sales -3.1%
- Year-over-year automotive +1.2%
- Year-over-year nondurables -6.2%, largely reflective of petroleum
- December-January Automotive -2.2%
- January-February Automotive -0.3%
I have been saying for quite some time as soon as autos roll over, a recession hits. Is this it?
Mike “Mish” Shedlock
tic tic tic…..boom
the drop in overall is more than explained by falls in oil and metals.
the numbers are meaningless in an activity context unless stated on a volume basis (not value as above)
same applies to the labor market – average work week has less meaning than total hours worked (and also shown per sector) to get a chart of employment trends (with or without robots)
No, runs deeper than that.
You’r neglecting revision to prior.
For example, from above electrical +3.1% and apparel +1.7%. Not bad, huh?
electrical sales
January $44.458 billion
February $45.830 billion
apparel sales.
January $13.964 billion
Februay $14.202 billion
Those numbers are this month’s with revision to January’s. What did January look like last month in initial report?
electrical $46.622 billion
apparel $14.699 billion
Without downward revision, both sales numbers would have been NEGATIVE.
February numbers will be revised when March numbers come out. Hhmm, wonder which way revisions will trend …
Spot on Tony.
Most people never bother looking at the downward revisions. The media ignores these revisions. Well most would not even know where to look and could care less as long as the media continues to talk about our great recovery. All people care about is social media, TV, and staying in touch on their phones and everything is ok.
No doc, subprime liars loans fully backed by the US government to the rescue!
Excellent post
First sentence should be .5% .. not 5%.
Revisions have been bad … and February number will be revised.
The bullz need to explain the collapse in sales.
I saw a Ford ad the other day for zero percent financing for 60 months. I immediately rhought, oh oh auto sales are falling.
How about some of that “negative” interest rate? If FORD will pay ME 5% over 60 months……I’ll buy……..
Dear Mish
I must not understand something. I though wholesale inventory being DOWN was a good sign for the economy as inventory was being drawn down???
Obviously that assumes production or sales constant so that later production might have to be ramped up. What am I missing?
Look at the chart
How much inventory liquidation did we see relative to sales?
Mish
Alcohol sales are up, party on!
Alcohol is the ultimate counter cyclical commodity. The ultimate hedge. Perhaps a reason why the stereotypical hedge funder is a boozed up fratboy?
At least ALCOHOL is up.
Tesla knows about four to “five hundred thousand” American car buyers that will not be in the market for a long time