Wholesale Inventories

Wholesale business inventories were unexpectedly unchanged in October. The market had been looking for a further increase of +.5% MoM. The October reading was the smallest increase this year. In addition, the September gain was revised down to +.6% MoM from the originally reported +.8% increase. Companies are clearly becoming more wary of boosting excess stockpiles as the economy slows. There also may be some give back occurring from the strong accumulation of the third quarter which was such a strong boost to GDP growth.

The decline in inventories was broadbased. Machinery is the only category to show a significant increase, at +.9% MoM. Durable goods inventories fell -.1% MoM while nondurables rose +.1% MoM. Petroleum stockpiles rebounded last month reversing the decline of the prior three months. Excluding petroleum stockpiles, wholesale inventories actually fell -.2% MoM in October, after climbing over +.7%MoM in each of the prior two months. Wholesale inventories account for about 25% of total business inventories.

In addition, sales rose +.7% MoM in October, after spiking +1.4% MoM in September, causing the inventory to sales ratio to decline to 1.09 months, a new record low going back to 1992. Computers and drugs saw the largest sales gains in October, growing over 4% MoM. Petroleum sales rose 1.2% MoM. Sales excluding petroleum rose +.6% MoM, a slightly stronger pace than the +.5% MoM gain in September.

Over the past year, wholesale inventories have risen +4.6% YoY and sales have risen +11.5% YoY. Within inventories, durable goods inventories have risen +0.5% YoY while non-durable goods inventories have risen +12.1% YoY. Over the same period, durable goods sales have risen +5.3% YoY and non-durable sales have grown +17.7% YoY. Within non-durables, petroleum sales have risen 38% YoY, primarily due to higher prices.

It appears that businesses are getting inventories back under control after experiencing involuntary growth over the summer.