Wholesale Inventories Rise

June wholesale inventories rose 0.3 percent in a build that for a second straight month is too low as sales surged 1.9 percent. The mix pulls down the stock-to-sales ratio two notches from 1.35 in May to 1.33 which appears to be too lean given the strength in sales.

And sales strength is impressive and is centered at the heart of business investment, that is machinery where wholesale sales surged 2.8 percent to add onto solid gains over the prior two months. Hardware sales, also key to business investment, surged 7.7 percent in the month. These sales gains hint at rising business expectations which are needed given general weakness in productivity (as seen in this morning's earlier report for the second quarter).

Judging by stock-to-sales ratios, both machinery and hardware need to be restocked along with metals and electrical goods which are two other business investment categories. Other areas posting big sales gains include farm products and petroleum, two non-durable categories subject, however, to monthly price swings.

Inventory is unwanted when sales are slow but when sales are picking up, inventories need to pick up too. Today's report falls in line with a building run of upbeat economic news.

Recent History Of This Indicator:
Wholesale inventories are expected to come in unchanged in June, in line with the advance report on wholesale inventories which made its data debut late last month. Wholesalers have been careful to keep their inventory growth at or under their sales growth.