Wholesale Trade: Business Inventories Build in July, Net Gain for Q3 GDP

The monthly wholesale trade report by the U.S. Census Bureau shows a 0.6% build in business inventories, a big net positive for third quarter gross domestic product (GDP). Inventories have been narrowing the gap between sales, which have trended higher.

Total inventories of merchant wholesalers, except manufacturers’ sales branches and offices, after adjustment for seasonal variations but not for price changes, were $636.3 billion at the end of July. Total inventories were up 5.0% (±3.9%) from the revised July 2017 level.

The June 2018 to July 2018 percent change was revised from the advance estimate of up 0.7% (±0.2%) to up 0.6 percent (±0.2%).

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 $505.6 billion in July. That’s virtually unchanged (±0.2%) from the revised June level.

However, sales were up 9.8% (±3.5%) from the July 2017 level. The May 2018 to June 2018 percent change was revised from the preliminary estimate of down 0.1% (±0.4%) to down 0.2% (±0.4%).

The July inventories/sales ratio for merchant wholesalers, except manufacturers’ sales branches and offices, based on seasonally adjusted data, was 1.26. The ratio in July 2017 was 1.32.

The Atlanta Fed’s GDPNow model estimate for real GDP growth (seasonally adjusted annual rate) in Q3 2018 is currently 3.8% as of September 11. While that’s down from 4.4% on September 5, it is still proving to be a much stronger economic year.