Economic Indicators: Wholesale Trade Report

The Monthly Wholesale Trade Report is based on a monthly survey of about 4,500 wholesale merchants operating in the United States. The report is compiled by the U.S. Census Bureau. The sample group is updated quarterly to reflect new businesses in the marketplace, and includes importers and exporters. While some wholesale companies do sell directly to end consumers (such as Costco), most companies surveyed here sell to retail businesses as their primary source of revenue.

The report presents three statistics to investors; monthly sales, monthly inventories and the inventory to sales ratio. The data is broken down into durables and non-durables, and from there about 8-10 industries within both. Coverage is nationwide.

Data is released about six weeks after the end of the month and the report will show any revisions for the previous two reports as well. Percentage changes are shown from the prior month and year-over-year to smooth out volatility. Figures are based on current dollar values for products when estimating sales and inventory levels, which is a change from other indicators that may value product based on volume.

Why the Monthly Wholesale Trade Report is important

This report complements data from other reports such as the Durable Goods report. The Monthly Wholesale Trade Report can also be used in conjunction with the annual report produced by the Census Bureau.

The inventories-to-sales (I/S) ratio in this report is probably the most-watched variable after the Durable Goods Report has come out to shed some light on the durable sales figures. Investors in non-durable industries like beverages and apparel will be happy to see some good representation in the Monthly Wholesale Trade Report.

When inventories are growing more slowly than sales, manufacturers and distributors will have to ramp up production to meet demand. If sales growth is slower than inventory growth, there will be an excess of supply which could indicate a slowdown in manufacturing activity in coming months. Because manufacturing is such a large part of GDP, the wholesale-trade data can be a valuable indicator for investors.

Strengths of the Wholesale Trade Report:

• There is an Annual Benchmark Report for Wholesale Trade released every spring that includes more detailed information such as annual sales estimates and gross margins for the industries that are sampled in the monthly report
• Provides a good snapshot of the "middle" of the supply chain for many industries—up the channel from manufacturing, but not yet retail
• A good indicator of supply/demand imbalances
• Long time series (since 1946) available
• Data provided "raw" and with seasonal adjustment

Weaknesses of the Monthly Wholesale Trade Report:

• Longer time lag than most
• Industry breakdowns not too specific
• The previously-released Durable Goods report will have already shed some light on wholesale results