Nice Wholesales Inventory Report Showing Better Sales and Reduced Inventories

U.S. Wholesale Inventories rose less than expected in March, and sales rose at the fastest rate in a year-and-a-half! This is good news, as it indicates the inventory overhang may be dissipating. Reduced inventories should spur demand for new production.

Wholesale inventories rose +.3% MoM (consensus +.4%), and account for about 25% of all business inventories. Plus, the prior month was revised down to +.4% MoM from +.5% initially. Durable goods inventories were unchanged in March, and machinery inventories fell a substantial -1.3% MoM. Non-durable goods inventories continued to rise, gaining +.8% MoM.

Sales rose +1.8% MoM, and were up +1.9% when petroleum sales are excluded (the largest monthly increase since 2004). For the past two months, ex-petroleum sales only rose +.2% MoM. Almost all categories saw improvement. Durable goods sales rose +2.1% MoM, with all major segments seeing growth, lead by computers +6.1% MoM, and machinery +3.4% MoM. This was the best month of durable goods sales in six months. Non-durable goods sales rose +1.5%, down from a +2.8% MoM gain in February. Both grocery and gasoline sales growth slowed in March. Oil prices rose about $4 a barrel during March, to only add +.8% MoM to petroleum sales growth.

The inventory-to-sales ratio has fallen back to 1.14 months of supply, down from 1.16 in January. The cycle low was 1.12 months, indicating that companies are regaining control over their stockpiles.

If sales growth continues to improve, excess inventories should continue to be worked down. This will help the manufacturing sector to recover, and growth to pick up later this year.