Wholesalers Inventory Builds Come In Stronger Than Expected

Inventory build for wholesalers came in 2 tenths stronger than expected at a 0.4 percent gain in December but in an offset for the second estimate of fourth-quarter GDP, the build for November is revised down 2 tenths to 0.6 percent.

Much of the recent build has been centered in autos where sales have been slowing noticeably. Yet autos aside, inventories in the sector do appear to be too low relative to wholesale sales, up 1.2 percent in December following a 1.9 percent rise in November. The year-on-year comparison tells the story, up 9.1 percent for sales in December vs only a 3.4 percent rise for inventories. The stock-to-sales ratio is down to 1.22 vs November's 1.23 and vs 1.29 in December last year.

Growth in the nation's inventories slowed in the fourth-quarter which is a negative for GDP but, given the strength of overall demand, the slowing points to the need for restocking which should prove a concrete plus for first-quarter production and employment.

Recent History Of This Indicator:
December wholesale trade inventories are expected to rise 0.2 percent in line with advance data which also showed a 0.2 percent build. Inventory build -- due to strong demand -- slowed in the fourth quarter in what held down GDP, yet this points to the need for restocking in the first quarter and gains in turn for production and employment.