I have sat, stared, and manipulated the wholesale data for an hour. This is really crappy data from a portion of the economy which was doing much better than other segments. The issues:
- I am trying to figure out how the U.S. Census Bureau could say that wholesale sales were flat month-over-month. The data, which was flying high, took an obvious 4% downshift MoM. This is still very good performance compared to other economic measurements.
- Non-Adjusted Inventory levels (ratio inventory to sales) jumped. This event happened in 2005 and 2006 – but has not occurred in the New Normal (post 2007). A spike this size is a rare occurrence. Speaking generally, a slowing economy causes higher inventory levels.
I have been adjusting wholesale trade using CPI – but wholesale trade product mix is not the same as consumers. It is not correct to use producer price (PPI) finish goods either as it has some partially processed and crude products. Overall, the PPI may even be understating the inflation. So beginning with this analysis, a deflated (chained) sales values will be against the PPI.
The inflation adjusted data is still showing 3.5% year-over-year growth. This month, almost 1/2 of the month-over-month decline can be laid at the feet of petroleum and unprocessed foods.
July 2011 broke a 4 month streak of record Wholesale sales data. It is difficult to see how a poor month coming after 4 record months could be considered “flat”.
Overall, the inventory-to-sales ratios (a rising ratio is an indicator of economic slowing) rose to the high end of a normal range.
There is nothing recessionary in this data at this point. The “less good” trend lines must hold for a few more months to give a recession signal. It is hard to argue the economy was in a recession in July, even based on this terrible data.