Wholesale Sales May 2012 Unadjusted Data Looks Fairly Good

Written by Steven Hansen

Wholesale sales have rebounded with a second good month in a row in May 2012.  Still it remains in a slowing growth pattern it since early 2011.  Econintersect analysis results indicate the economy is much stronger than the interpretation of the U.S. Census Bureau.

US Census Headlines:

  • sales down 0.8% month-over-month, up 5.7% year-over-year
  • inventories up 0.3% month-over-month, sales-to-inventory ratios were 1.17 one year ago – and are now 1.18
  • the market expected an inventory increase of 0.2% to 0.3% (versus the headline 0.3%)

Econintersect Analysis:

  • sales up 2.4% month-over-month, and up 8.7% year-over-year
  • sales (inflation adjusted) up 9.8% year-over-year (note: according to the BLS, the price inflation in the wholesale trade PPI sub-index is -1.1% in May 2012. This sector is deflating)
  • inventories contracted 0.8% month-over-month, sales-to-inventory ratio is 1.11 which is low for Mays (good: inventories are not growing).

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

Wholesale sales remain in a downward growth trend even with the good data this month. Still, May 2012 is a record current dollar sales month compared to the same month in past years.

Wholesale Sales – Unadjusted – $ Millions

Wholesale sales have hit new monthly record highs 13 of the last 15 months (using current dollars). Overall, the inventory-to-sales ratios (a rising ratio is an indicator of economic slowing) is on the low end of the range for the month of May historically.

The takeaway is that sales-to-inventory levels are low historically. This is normally a good sign.

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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