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Wholesale Inventories-to-Sales Ratio Hits Recovery High, Indicating Weakness

Wholesale trade took a tumble in March, according to a Commerce Department report (link opens in PDF) released today.

Although analysts' expectations of a 0.4% increase in inventories to $503.1 billion proved spot-on, a coinciding 1.6% drop in sales to $417.7 billion pushed business's balance off even more.

The month-to-month sales slump is primarily due to weaker-than-expected gasoline demand. Sales of petroleum and petroleum products fell 7.5%, while apparel sales fell 5.5%. Sales of durable goods dropped 0.6% from February while non-durables dipped 2.5%.

On the inventories side, hardware jumped 2.1% higher and apparel added 1.7%. A 3.4% drop in petroleum inventories helped keep nondurable goods inventory gains to a 0.1% increase, while durable goods inventories increased 0.5%. 

Compared to March 2012, both sales and inventories are up, but inventories' 4.7% increase  outstrips sales' 1.3% bump.

To understand the rate at which goods are being made and sold, economists compute an inventories/sales ratio. Since sales fell and inventories rose from February to March, the inventories/sales ratio also rose, from 1.19 to 1.21. This is the largest inventory/sales ratio recorded since the recovery began.



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