The Monthly Wholesale Trade Report is produced by the US Department of Commerce, Bureau of the Census based on a survey of about 4,500 wholesale merchants The report presents three statistic: Monthly sales, monthly inventories and the inventory to sales ratio. The data is broken down into a small number of industry categories.
In April, wholesale sales increase by 0.5 percent to $416.6 billion. This was due to significant growth in the automotive, furniture, machinery and paper goods caterories. Wholesale sales of petroleum and alcohol products fell substantially in April. In addition to higher wholesale sales, inventories also rose in April – up 0.2 percent to $504.8 billion. Higher inventories were driven by increases in automobiles, paper products and beverage alcohol. Even with the higher inventory levels, inventory to sales ratios remained fairly constant in April at 1.21, up from 1.17 in April 2012
Activity at the wholesale level can be a precursor for consumer trends and changes in overall economic activity. If inventory growth lags sales growth, then it is likely that firms will begin to increase production, while an increase in the inventory to sales ratio is a sign of a weakening economy.
The slow growth in inventories suggests that manufacturers are doing a good job in managing inventory since the end of the recession. It is unlikely that the Keynesian idea of rapid inventory accumulation leading to reductions in production are probably not likely since manufacturers are not rapidly ramping up production.