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November 2012 Wholesale Sales & Inventories Show Sluggish Economy

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November 2012 wholesale sales and inventories did not look as good as last months strong data – but still ok. This data series is very noisy, and must suffer from data gathering anomalies. This analysis continues to be the opposite of the published headline analysis.

Econintersect Analysis:

  • sales down 2.4% month-over-month, and up 5.7% year-over-year
  • sales (inflation adjusted) up 1.0% year-over-year
  • inventories up 0.3% month-over-month, inventory-to-sales ratio is 1.12 which is normal for Novembers.

There is no recessionary feel in this data, and but is demonstrating a sluggish economy.

US Census Headlines:

  • sales up 2.3% month-over-month, up 5.6% (versus up 2.3% last month) year-over-year
  • inventories up 0.6% month-over-month, inventory-to-sales ratios were 1.17 one year ago – and are now 1.19
  • the market expected an inventory increase of 0.2% (versus the headline 0.6% growth)

Year-over-Year Growth – Wholesale Sales – Unadjusted data (blue line) & Inflation Adjusted Data (red line)

/images/wholesale_yoy.PNG

It is clear wholesale sales remain in a long term downtrend since mid 2011 – but is in a 3 month up trend. November 2012 sales were at an all time high for Novembers (expressed in current dollars).

Wholesale Sales – Unadjusted – $ Millions

/images/wholesale_2005on.PNG

Wholesale sales have hit new monthly record highs 17 of the last 20 months (using current dollars). Overall, the inventory-to-sales ratios (a rising ratio is an indicator of economic slowing) is mid-range for the month of November historically.

Unadjusted Inventory-to-Sales Ratio (blue line, left axis) and Year-over-Year Change Unadjusted Inventory-to-Sales Ratio (red line, right axis)

/images/z wholesale1.png

The red line showing year-over-year change is what is important – and this line seems to show a growing inventory trend since 2010.

Caveats on the Use of this Index

The data in this index continues to be revised up to 3 months following initial reporting. The revision usually is not significant enough to change the interpretation of each month’s data in real time. Generally there are also annual revisions to this data series.

The methodology used by US Census to seasonally adjust the data is not providing a realistic understanding of the month-to-month movements of the data. One reason is that US Census uses data over multiple years which includes the largest modern recession which likely distorts the analysis. Further, Econintersect believes there has been a fundamental shift in seasonality in the aftermath of the Great Recession of 2007 – the New Normal.

Econintersect determines the month-over-month change by subtracting the current month’s year-over-year change from the previous month’s year-over-year change. This is the best of the bad options available to determine month-over-month trends – as the preferred methodology would be to use multi-year data (but the New Normal effects and the Great Recession distort historical data).

This series is NOT inflation adjusted. To make this adjustment Econintersect uses the PPI – subindex Total Wholesale AWHLTRAWHLTR.

As economic indicators go, wholesale sales and inventories are poor at spotting economic problems. Wholesale data did not start contracting during the Great Recession until October 2008. The only portion of wholesale trade data which seems to correspond to general economic conditions is wholesale trade employment.

All Employees – Wholesale

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