The Census Bureau Wholesale Trade Report wholesales rose 1.4% while inventories declined 0.4%.

Once again, this news had the Bloomberg Econoday parrot squawking about “lean inventories”.

Highlights

Inventories were looking heavy going into the fourth quarter but, given strength in demand, are turning out to be perhaps too lean. Inventories at the wholesale level fell 0.4 percent in October, drawn down by a 1.4 percent surge in wholesale sales. The mismatch drops the stock-to-sales ratio from 1.32 to 1.30 for the lowest reading in nearly two years. Advance data for retail point to a similar decline for retail inventories to be posted next week while factory inventories, posted earlier in the week with the factory orders report, were unchanged.

Advance Readings

This was pretty much non-news given advance readings on December 6. The Econoday consensus was -0.4%, bang on.

Curiously, the consensus range was -0.4 % to 0.3 %, a likely indication that one economist did not read or did not believe the the advance sales reports.

Inventory-to-Sales

inventories-to-sales-2016-12a

There is nothing particularly lean about this adjustment. Rather, it’s starting to look “normal” if one considers 1990-2000 as normal as opposed to 2001-2015 (excluding the recession).

Mike “Mish” Shedlock