Wholesale Trade

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DEFINITION of 'Wholesale Trade'

An economic indicator that measures the value in U.S. dollars of all merchant wholesalers' sales and inventories. Wholesale trade is one component of business sales and inventories. Only those firms which sell to governments, institutions and other businesses are considered part of wholesale trade.

BREAKING DOWN 'Wholesale Trade'

Wholesale-trade data gives investors a closer look at the consumer economy, as sales and inventory numbers can be a leading indicator of consumer trends. By looking at the ratio of sales to inventories, investors can see whether or not production may grow or slow in the future.

For example, if inventories are growing more slowly than sales, producers will have to make more product so that no shortages occur. Alternatively, if sales growth is slower than inventory growth, there will be an excess of supply, and production should slow in coming months. Because manufacturing is such a large part of GDP, the wholesale-trade data can be a valuable tool for keeping a finger on the pulse of the economy.

Equity markets are positively affected by an increase in production, as corporate profits increase. The bond markets, on the other hand, prefer moderate growth so as to stem inflation.

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