Wholesale Sales and Inventories Jump: Drugs, Groceries Lead the Way

Wholesale inventories in June rose 0.7% vs a Bloomberg Econoday consensus of 0.6%.

Econoday was happy with the results but let’s dive a little deeper.

Wholesale inventories rose a sharp 0.7 percent in June in what was a wanted build given a likewise 0.7 percent rise in sales. The stock-to-sales ratio is unchanged at a lean 1.29. If there is an imbalance, it’s inventories of autos which rose 1.4 percent while sales fell 0.5 percent. Otherwise this a very positive report, pointing at the same time to sales growth and inventory growth.

Diving Deeper

Diving deeper into the Monthly Wholesale Trade Report, it’s not just autos that have an anomaly.

Analyzing the Skew

• For the month of June, sales rose 0.7% but durable goods sales were flat.
• Nearly the entire sales charge came from drugs, groceries, and petroleum. This does not merit any economic cheerleading.
• For the last two months, durable goods sales rose a collective 0.1%. Durable goods inventories rose a collective 1.1%.
• For the last two months, automotive sales declined a collective 1.1% while auto inventories rose a whopping 2.0%. Once again, this does not merit any economic cheerleading.
• For the last two months, drugs sale rose a collective and whopping 4.6%! Not only is the percentage high, drugs is the single biggest category, by economic value, in the entire report. To repeat, this does not merit any economic cheerleading.
• Drugs also fueled inventories. The two-month collective inventory total is 2.6%.
• For the last two months, grocery sales rose a collective 1.8%! Groceries is the second largest category, by economic value, in the entire report. The two-month collective inventory total for groceries 0.9%, all in June.
• Electrical, the third largest category in the report, was up 1.3%. This is the only significant category in the report meriting any cheerleading.
• Petroleum sales rose 1.9% in June. By value, Petroleum is the fourth largest category in the report. That rise is on the heels of a 6.9% drop in May.

Synopsis

People are eating more and taking more prescription drugs. Outside of autos, Econoday labels this a “very positive” report. Really?

Mike “Mish” Shedlock