July Wholesale Inventory Accumulation Slows as Sales Demand Eases

Inventory stockpiles at wholesalers grew by the smallest amount this year, increasing a less than expected +.2% MoM (consensus +.4%) in July. In addition, June's growth was revised down to +.3% from +.5%. Factory inventories also rose at +.2% MoM in July. Unfortunately sales also grew at their slowest pace since January at +.1% MoM. Combined, they imply that production is likely to slow on reduced demand. The most recent manufacturing ISM shows growth has slowed to a five month low.

Based on current sales, current inventory should take 1.11 months to turn over, an unchanged pace from June. Wholesale inventories constitute approximately a quarter of all business stockpiles. Over the past year, sales have grown +7.2%, mainly in non-durable good which have risen +10% YoY. Sales excluding petroleum have risen +6.9% YoY.

Inventories of durable goods meant to last many years fell by -.5% MoM (+2.1% YoY) in July, lead by automakers (-1.7% MoM, -5.8% YoY) and metal producers. GM has also stated that they are going to reduce production for the remainder of this year.

Non-durable inventories rose +1.5% MoM (+11.5% YoY) lead by farm products, and their sales growth slowed to +.1% MoM. Higher oil prices increase the value of inventories, and have made this factor extremely variable this year. Wholesale petroleum inventories fell -.1% Mom in July after rising +2.1% MoM in June.

Interest rates have continued to decline since this morning's employment report. Two year Treasury yields are now down 17.5bp. The dollar index has fallen below 80, to trade at its lowest level since 1992!