Wholesale Inventories Fall For Second Straight Month

Stocks at U.S. wholesalers shrank in January, the second consecutive monthly decline, Commerce Department data showed Thursday.

Inventories at merchant wholesalers were down 0.5 percent compared with the prior month, according to the seasonally adjusted figures. In December, inventories contracted by 0.1 percent.

The measure of inventories is a key element in the government’s assessment of economic growth. Following the release, the Atlanta Fed’s GDPNOW forecast for first-quarter GDP growth was revised down from 2.7 percent to 2.3 percent.

Inventories of durable goods–products made to last longer than three years–were flat in January after rising 0.2 percent in December. Wholesale inventories of furniture, professional equipment, computers, and electrical equipment rose. Inventories of cars and trucks, lumber, metals, and hardware declined.

Nondurables, products made to be consumed in the near-term, contracted. The biggest declines were in drugs, farm products, and alcohol. Chemicals, petroleum, paper, and groceries inventories also fell. Apparel inventories rose.

Compared with a year ago, inventories are up one percent, with durables up 0.9 percent and nondurables up 1.3 percent. The numbers are not adjusted for inflation, however, so those increases likely represent declines in inflation-adjusted terms.

The ratio of inventories to sales—measuring how many months it would take for wholesalers to sell current stocks—was nearly unchanged at 1.25 compared to 1.26 in December. A year ago, it was 1.33.

The data suggests suggest that wholesalers were slowly bringing down inventory levels in January, likely in anticipation of a slowdown in consumer demand. But current ratios of inventories to sales do not indicate a significant “overhang” of unsold goods. Some of the decline could be a normalization after wholesalers stockpiled goods ahead of expected tariff increases. That looks to the be the case in pharmaceuticals, where inventories are up six percent from a year ago.