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Wholesale Sales At Historical High in November 2010

Wholesale Sales were strong in November 2010 according to US Census and analysis by Econintersect.  In fact, they are historically high for the month of November.  The headlines:

Sales. The U.S. Census Bureau announced today that November 2010 sales of merchant wholesalers, except manufacturers’ sales branches and offices, after adjustment for seasonal variations and trading-day differences but not for price changes, were $370.1 billion, up 1.9 percent (+/-0.4%) from the revised October level and were up 12.2 percent (+/-1.4%) from the November 2009 level.  The October preliminary estimate was revised upward $1.2 billion or 0.3 percent.  November sales of durable goods were up 1.7 percent (+/-0.7%) from last month and were up 12.6 percent (+/-1.4%) from a year ago.  Compared to last month, sales of hardware, and plumbing and heating equipment and supplies were up 5.5 percent and sales of electrical and electronic goods were up 3.2 percent.  Sales of nondurable goods were up 2.1 percent (+/-0.7%) from last month and were up 11.8 percent (+/-1.9%) from last year.  Sales of petroleum and petroleum products were up 7.1 percent from last month and sales of drugs and druggists’ sundries were up 3.1 percent.

Inventories. Total inventories of merchant wholesalers, except manufacturers’ sales branches and offices, after adjustment for seasonal variations but not for price changes, were $425.5 billion at the end of November, down 0.2 percent (+/-0.4%)* from the revised October level, but were up 8.4 percent (+/-1.2%) from a year ago.  The October preliminary estimate was revised downward $0.7 billion or 0.2 percent.  End-of-month inventories of durable goods were up 0.3 percent (+/-0.5%)* from last month and were up 5.5 percent (+/-1.4%) from last November.  Inventories of motor vehicle parts and supplies were up 1.9 percent, while inventories of computer and computer peripheral equipment and software were down 1.8 percent from last month.  End-of-month inventories of nondurable goods decreased 0.9 percent (+/-0.5%) from October, but were up 12.7 percent (+/-2.6%) compared to last November.  Inventories of farm product raw materials were down 6.8 percent from last month.

Inventories/Sales Ratio. The November inventories/sales ratio for merchant wholesalers, except manufacturers’ sales branches and offices, based on seasonally adjusted data, was 1.15. The November 2009 ratio was 1.19.

Wholesale data is important as it represents a one month window into retail sales – in other words, this data gives an indication of what November retail sales data will look like.  Early indications are that December sales were up, and this wholesale data adds confidence that the December retail numbers will be up YoY.

Econintersect uses unadjusted data to analyze because seasonal adjustment factors are suspect due to the distortions of a deep recession and New Normal data characteristics.  How these factors play into the quantitative methodologies used in seasonal adjustments is not clear and cannot be easily factored in interpretation.

With simple observation of this chart, wholesale sales are higher than any November in the last five years – and going back through the Census records, this is an historical high for November.

The chart above shows the current inventory levels divided by the month sales.  This ratio fluctuates due to seasonal characteristics of both sales and inventory.  This number is watched by Econintersect as it offers an early warning of an economic stall – which would be indicated by a sharp rise in this ratio caused by slowing sales.  Not only is this ratio is well within the expected channel for November, except for 2007 – is also one of the best historical ratios for November.  Note:  For this ratio, low is good.

Overall wholesale sales and inventories are indicating that recovery is well underway.  Sad that this is only a small portion of the economy.

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