The unadjusted sales growth of the wholesale trade sector of the economy has been up-trending steadily for the last four months. Last month was the best November ever – December 2010 is the best December ever.
This is mirroring what we are seeing in retail sales. Total business income is 37% from manufacturing, 30% from retail sales, and 33% from wholesale sales. Wholesale sales is a significant portion of business sales.
The press release for December 2010 wholesale sales in part:
Sales. The U.S. Census Bureau announced today that December 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 $371.5 billion, up 0.4 percent (+/-0.7%)* from the revised November level and were up 11.6 percent (+/-1.8%) from the December 2009 level.
Inventories. Total inventories of merchant wholesalers, were $430.5 billion at the end of December, up 1.0 percent (+/-0.4%) from the revised November level and were up 10.5 percent (+/-1.4%) from a year ago.
Inventories/Sales Ratio. The December inventories/sales ratio for merchant wholesalers, except manufacturers’ sales branches and offices, based on seasonally adjusted data, was 1.16. The December 2009 ratio was 1.17.
Using the unadjusted data to determine the increase in sales, the New Normal data shows that November to December sales increases in 2008 and 2009 were 3% higher than these current November to December 2010 increases.
But stepping back from the data, and looking at the overall trend, we are ignoring this one month anomaly. The data trend line is showing strength.
Wholesale data is important as it represents a one month window into retail sales – in other words, this data gives an indication of what January retail sales data will look like.
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.
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. The December 2010 ratio is the best December yet. Note: For this ratio, low is good.
Overall wholesale sales and inventories are indicating that the economy is growing.