Wholesale Sales: Evidence of Moderate Growth

Wholesale sales continued expanding YoY in February 2011.  Yet the US Census claims sales contracted 0.8% using their seasonal adjustment methodology.  Highlights from today’s data report: 

Sales. The U.S. Census Bureau announced today that February 2011 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 $379.0 billion, down 0.8 percent (+/- 0.7%) from the revised January level, but were up 13.7 percent (+/-1.4%) from the February 2010 level. The January preliminary estimate was
revised downward $0.7 billion or 0.2 percent. February sales of durable goods were down 1.2 percent (+/-1.2%)* from last month, but were up 12.5 percent (+/-1.9%) from a year ago. Compared to last month, sales of furniture and home furnishings were down 4.1 percent and sales of electrical and electronic goods were down 2.6 percent. Sales of nondurable goods were down 0.4 percent (+/-0.7%)* from last month, but were up 14.7 percent (+/- 1.6%) from last year. Sales of farm product raw materials were down 3.5 percent from last month, while sales of grocery and related products were up 3.5 percent.

Inventories. Total inventories of merchant wholesalers, except manufacturers’ sales branches and offices, after adjustment for seasonal variations but not for price changes, were $438.0 billion at the end of February, up 1.0 percent (+/-0.2%) from the revised January level and were up 12.7 percent (+/-1.2%) from a year ago. The January preliminary estimate was revised downward $0.1 billion. End-of-month inventories of durable goods were up 0.6 percent (+/-0.4%) from last month and were up 9.5 percent (+/-1.4%) from last February. Inventories of metals and minerals, except petroleum were up 2.8 percent and inventories of hardware, and plumbing and heating equipment and supplies were up 1.5 percent from last month.  End-of-month inventories of nondurable goods increased 1.5 percent (+/-0.4%) from January and were up 17.3 percent (+/-2.3%) compared to February. Inventories of petroleum and petroleum products were up 9.3 percent from last month.

Inventories/Sales Ratio. The February inventories/sales ratio for merchant wholesalers, except manufacturers’ sales branches and offices, based on seasonally adjusted data, was 1.16.  The February 2010 ratio was 1.17.

This month the entire data series was revised, and it was adjusted enough to subtly change perception of where wholesale trade data is currently.  Econintersect evaluates using unadjusted data, and therefore correct analysis is on a YoY basis.   Here is what the wholesale sales graph looked like last month.

Retail sales were in historical high territory (not adjusted for inflation) for three months in a row.  One month later, the graph has changed.

Wholesale sales in January 2011 was no longer in record territory – and the US Census general revision lowered the recent values – and raised the values for the data further back in time.  Still, sales are strongly up YoY – and it is difficult to sustain an argument that there is any sort of contraction evident in the February data.

Inventories are well within the normal range for February’s.  High inventory-to-sales ratios normally indicate a slowing economy as production exceeded expected demand.  However, inventory levels have seasonal characteristics and must be analyzed against previous year’s levels.

Overall, this data is strong just not as strong as it would have been had US Census not revised their data gathering methodology.  This data indicates the economy has grown, but in February, may not have grown to the same extent as 4Q2010.

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