Market Overview

Wholesale Inventories Rise Less than Expected

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The Wholesale Inventory Survey measures monthly sales, end-of-month inventories, and inventories-to-sales ratios of businesses for wholesale firms located in the United States.

Specifically, the survey covers wholesale merchants who sell goods on their own account and include such businesses as wholesale merchants, industrial distributors, exporters, and importers.

Traders key in to this report to see the potential health of consumer spending. Generally, high Wholesale Inventories signal that goods are piling up, which potentially indicates that retailers are facing slowing consumer demand, as consumers are unwilling to purchase goods.

Wholesale Inventories in March rose 0.3 percent, which was lower than the estimated rise of 0.6 percent.

According to the US Census Bureau, 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 $411.1 billion, up 0.5 percent from the revised February level and were up 6.5 percent from the March 2011 level.

Total inventories of merchant wholesalers, except manufacturers' sales branches and offices, after adjustment for seasonal variations but not for price changes, were $480.4 billion at the end of March, up 0.3 percent from the revised February level and were up 8.4 percent from the March 2011 level.

The February preliminary estimate was virtually unchanged. March inventories of durable goods were up 1.0 percent from last month and were up 10.8 percent from a year ago.

Inventories of lumber and other construction materials were up 2.1 percent from last month and inventories of machinery, equipment, and supplies were up 1.6 percent.


ACTION ITEMS:

Bullish:
Traders who believe that Wholesale Inventories are a leading indicator for the US economy, you might want to consider the following trades:
  • If the data was higher than expected, short general merchandise companies like Fred's (NASDAQ: FRED) as these companies will not benefit as consumers might not be spending as previously thought.
  • Also, short technology retailers like BestBuy (NYSE: BBY).
Bearish:
Traders who do not believe that Wholesale Inventories are a leading indicator for the general US economy, you may consider alternative positions:
  • Long Consumer Staple companies like Procter & Gamble (NYSE: PG) and Colgate (NYSE: CL) because even if the economy is struggling, people still need to buy staple products like shampoo and toothpaste.
  • Also, long big-ticket appliance makers like Whirlpool (NYSE: WHR), since they will likely be oversold.
Neither Benzinga nor its staff recommend that you buy, sell, or hold any security. We do not offer investment advice, personalized or otherwise. Benzinga recommends that you conduct your own due diligence and consult a certified financial professional for personalized advice about your financial situation.

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