Wholesale inventory growth lower than expected

Inventory growth in the wholesale sector proved much lower than expected, at 0.1 percent in July vs the Econoday forecast for 0.5 percent. But this is good news given a very strong 0.7 percent rise for wholesale sales that pulls down the stock-to-sales ratio one notch to a very lean 1.16 from 1.17. Low inventories point to the need for restocking while strong sales point to strong demand from the retail sector.

Wholesale inventories of farm products and computer equipment fell sharply in the month as did inventories of petroleum products. On the build side were apparel and drugs as well as autos where manufacturing output has been rising to meet strong retail demand.

Today's report is likely to lower the outlook for Friday's business inventories report where the Econoday consensus is currently calling for a 0.4 percent build. A lower contribution from inventories could lower third-quarter GDP forecasts but, given the need for rebuilding, is a plus for production and employment.