Wholesale Inventories Dip into the Red

The report on wholesale trade in the month of June is now out, but we have already seen some of this in trade deficit data and in the most recent Q2 GDP preliminary data. The Commerce Department showed that wholesale trade was down by 0.2% during the month of June, and that is after a flat revision in May. Dow Jones was looking for a gain of 0.3% and Bloomberg was also calling for a gain of 0.3%.

Wholesale trade matters, as it measures the dollar value of sales made and inventories held by merchant wholesalers. It is also a component of business sales and inventories. The seasonally adjusted figure was $481.9 billion, but sales for wholesalers fell 1.4% to almost $402.9 billion.

The implication here is easy to see. Businesses are reluctant to hold lots and lots of inventories. With a weak economy, business owners do not want their capital tied up in a bunch of goods that they may have to discount to push out the door.

Today’s news is simply an explanation of “JIT” inventories … “just in time,” even if it has been used more for manufacturing supplies in the past.

JON C. OGG