The inventories number will lead to a slight trimming of Q3 GDP trackers.
US wholesale inventories measure the value of goods held for resale by merchant wholesalers, providing a snapshot of stockbuilding between producers and retailers or other business customers. Published monthly by the Census Bureau, the wholesale trade report includes sales and the inventories-to-sales ratio. An advance inventory estimate arrives earlier, giving economists an initial input for GDP forecasts.
The headline figure is the monthly percentage change in seasonally adjusted inventories. A rise is not automatically positive: businesses may be stocking up ahead of stronger demand, or accumulating unwanted goods because sales have disappointed. Falling inventories can reflect healthy demand outstripping supply, or deliberate cutbacks as companies become more cautious.
That makes wholesale sales and the inventories-to-sales ratio essential context. The ratio expresses how many months of sales current stocks represent. A rising ratio can suggest goods are moving more slowly, potentially prompting discounts and reduced orders. A falling ratio can point to leaner stocks and a need for replenishment.
Inventories also matter for GDP, although the arithmetic is often misunderstood. The contribution to growth depends on whether inflation-adjusted inventory accumulation accelerates or slows. Stocks can therefore rise while inventories subtract from GDP growth if the buildup is smaller than in the previous quarter.
Another caveat is that the headline Census figures are dollar values, not adjusted for price changes. Higher commodity prices can lift reported inventories without an equivalent increase in physical goods.
For traders, the release generally matters most when revisions alter GDP forecasts or the sales figures reveal an unexpected shift in underlying demand.
This article was written by Adam Button at investinglive.com.
Source: Investing Live - News
