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March 2013 Wholesale Sales Contraction Continues

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March 2013 wholesale sales and inventories data continues to go up one month, down the next. This data series is very noisy, and suffers from data gathering anomalies as well as poor headline methodolgy. This analysis is worse than the published headline analysis. March happens to be the “very bad” month showing a year-over-year contraction for the second month in a row.

Econintersect Analysis:

  • sales down 1.2% month-over-month, and down 1.5% year-over-year
  • sales (inflation adjusted) down 2.5% year-over-year
  • inventories unchanged month-over-month, inventory-to-sales ratio is 1.19 which is very high for non-recession Marchs.

US Census Headlines:

  • sales down 1.6% month-over-month, up 1.3% (versus up 3.7% last month) year-over-year
  • inventories up 0.4% month-over-month, inventory-to-sales ratios were 1.17 one year ago – and are now 1.21
  • the market expected an inventory increase of 0.3% (versus the headline 0.4% 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. March sales were NOT at an all time high for Marchs (expressed in current dollars) – second month in a row.

Wholesale Sales – Unadjusted – $ Millions

/images/wholesale_2005on.PNG

Wholesale sales have hit new monthly record highs 19 of the last 24 months (using current dollars). Overall, the inventory-to-sales ratios (a rising ratio is an indicator of economic slowing) is high for Marchs 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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