Tuesday, May 11, 2010

Wholesales Sales Jump... How Much is "Real"

Peter Boockvar (via The Big Picture):

March Wholesale Inventories rose .4%, a touch below expectations of a gain of .5% and with a 2.4% rise in sales, the inventory to sales ratio fell to a record low of 1.13 months down from 1.16 in February.

Thus, while we’ve seen a big reversal in the absolute level of inventory drawdowns that has lifted GDP over the past 4 quarters, the restocking that typically follows in past recoveries has been muted. Of course though, the backdrop is very positive for production if the pick up in end demand becomes sustainable.

Auto inventories at the wholesale level rose for a 2nd straight month but are still down 11.2% y/o/y. Inventories of computers rose for the 6th month in the past 7 and are up 10.7% y/o/y but the sales of computers are up 15.4% y/o/y. Wholesale inventories of machinery fell for the 14th straight month.
The chart below shows the components of the jump, which is widespread.



But as EconomPic has detailed before... these are in nominal terms (unfortunately no time to break out how much is real vs. nominal). The biggest increase was in lumber, which jumped ~15%. Unfortunately, the price of lumber also jumped ~15% in March (and is up a whopping 50% YTD) and the second largest jump was in petroleum, but oil jumped ~7% in March (and has since collapsed a bit).

I am hopeful with the reduced inventory levels should the economy pick up, but don't read too into the whopping sales figure.

Source: Census