1. Economic Indicators: Overview
  2. Economic Indicators: Beige Book
  3. Economic Indicators: Business Outlook Survey
  4. Economic Indicators: Consumer Confidence Index (CCI)
  5. Economic Indicators: Consumer Credit Report
  6. Economic Indicators: Consumer Price Index (CPI)
  7. Economic Indicators: Durable Goods Report
  8. Economic Indicators: Employee Cost Index (ECI)
  9. Economic Indicators: Employee Situation Report
  10. Economic Indicators: Existing Home Sales
  11. Economic Indicators: Factory Orders Report
  12. Economic Indicators: Gross Domestic Product (GDP)
  13. Economic Indicators: Housing Starts
  14. Economic Indicators: Industrial Production
  15. Economic Indicators: Jobless Claims Report
  16. Economic Indicators: Money Supply
  17. Economic Indicators: Mutual Fund Flows
  18. Economic Indicators: Non-Manufacturing Report
  19. Economic Indicators: Personal Income and Outlays
  20. Economic Indicators: Producer Price Index (PPI)
  21. Economic Indicators: Productivity Report
  22. Economic Indicators: Purchasing Managers Index (PMI)
  23. Economic Indicators: Retail Sales Report
  24. Economic Indicators: Trade Balance Report
  25. Economic Indicators: Wholesale Trade Report

By Ryan Barnes

Release Date: On or around the 9th of the month
Release Time: 10am Eastern Standard Time
Coverage: Two months prior (report released six weeks after period end)
Released By: U.S. Census Bureau
Latest Release: http://www.census.gov/mwts/www/currentwhl.html

Background
The Monthly Wholesale Trade Report is based on a monthly survey of about 4,500 wholesale merchants operating in the United States. The sample group is updated quarterly to reflect new businesses in the marketplace, and includes importers and exporters. While some wholesale companies do sell directly to end consumers (such as Costco), most companies surveyed here sell to retail businesses as their primary source of revenue.

The report presents three statistics to investors; monthly sales, monthly inventories and the inventory to sales ratio. The data is broken down into durables and non-durables, and from there about 8-10 industries within both. Coverage is nationwide

Data is released about six weeks after the end of the month and the report will show any revisions for the previous two reports as well. Percentage changes are shown from the prior month and year-over-year to smooth out volatility. Figures are based on current dollar values for products when estimating sales and inventory levels, which is a change from other indicators that may value product based on volume.

What It Means for Investors
The inventories-to-sales (I/S) ratio is probably the most-watched variable after the Durable Goods Report has come out for the month to shed some light on the durable sales figures. Investors in non-durable industries like beverages and apparel will be happy to see some good representation in the Monthly Wholesale Trade Report.

The I/S ratio does a good job of indicating any supply/demand imbalances that exist in the economy. For example, if retail demand is higher than current production levels support, the I/S ratio will show this by falling (in this scenario, an I/S ratio of 1 means that current inventory levels can meet one month of current demand). A rising I/S ratio should be met with higher retail demand or corporate profits could be contracting, as extra costs to maintain inventory or slow production add up. Because of this, the I/S ratio is labeled as a lagging indicator by the Conference Board and most economists. According to the Conference Board, "because inventories tend to increase when the economy slows and sales fail to meet projections, the ratio typically reaches its cyclical peak in the middle of a recession."




It all depends on where the economy, or even a particular industry, stands in relation to earnings expectations and potential. As long as the I/S ratio does not change dramatically from month to month, the report will not elicit a strong response in the stock and bond markets; its biggest benefit is the ability to predict future GDP levels or its utility in researching specific industry trends.


Because inventory values are measured in current dollars, price changes month to month will change inventory values even if the amount of supply stays constant. This is especially important to note for industries such as chemicals and petroleum when viewing this report.

Strengths:
  • There is an Annual Benchmark Report for Wholesale Trade released every spring that includes more detailed information such as annual sales estimates and gross margins for the industries that are sampled in the monthly report
  • Provides a good snapshot of the "middle" of the supply chain for many industries - up the channel from manufacturing, but not yet retail.
  • A good indicator of supply/demand imbalances
  • Long time series (since 1946) available
  • Data provided "raw" and with seasonal adjustment
Weaknesses:
  • Longer time lag than most
  • Industry breakdowns not too specific
  • The previously-released Durable Goods report will have already shed some light on wholesale results
The Closing Line
Monthly Wholesale Trade Report is not potent enough to move the markets, but it is very useful when taken in context with other industry-specific indicators to gauge sales and demand; it is also helpful in predicting quarterly gross domestic product (GDP) figures.

Related Articles
  1. ETFs & Mutual Funds

    Introduction To Coincident And Lagging Economic Indicators

    Investors can learn a lot, or very little, from these indicators once they know how to use them.
  2. Managing Wealth

    Economic Indicators That Do-It-Yourself Investors Should Know

    Understanding these investing tools will put the market in your hands.
  3. Retirement

    Economic Indicators: Purchasing Managers Index (PMI)

    By Ryan Barnes Release Date: The first business day of the month Release Time: 10am Eastern Standard Time Coverage: Previous month's data Released By: Institute for Supply Management (ISM) Latest ...
  4. Investing

    How to Analyze a Company's Inventory

    Discover how to analyze a company's inventory by understanding different types of inventory and doing a quantitative and qualitative assessment of inventory.
  5. Trading

    Leading Economic Indicators Predict Market Trends

    Leading indicators help investors to predict and react to where the market is headed.
  6. Trading

    5 Reports That Affect The U.S. Dollar

    These five reports provide short- and long-term insight into the valuation of the U.S. dollar.
  7. Investing

    Days Sales of Inventory

    Days Sales of Inventory, also called Days Inventory Outstanding, is a key financial measurement of a company's performance pertaining to inventory management. In simple terms, it tells how many ...
  8. Investing

    How to Calculate Average Inventory

    Average inventory is the median value of an inventory at a specific time period.
  9. Markets

    Understanding Wholesale Banking

    Wholesale banking refers to banking services for merchant banks and other financial institutions.
  10. Markets

    Jobs Report vs. Jobless Claims: What Gives?

    The May jobs report was bad, but jobless claims and wholesale inventories were good. What gives?
Trading Center