EmailMerchant wholesaler inventories increased 0.6% in June after increasing a downwardly revised 1.7% (from 1.8%) in May. The Briefing.com consensus -- using the BEA's estimates from the advance Q2 2011 GDP report as a guide -- expected wholesale inventories to increase 1.0%.
The economic recovery over the last six months -- which was already the slowest since the end of the recession -- is actually worse than reported in the advance Q2 2011 GDP numbers. The BEA will revise second quarter GDP growth lower in the second estimate to account for the weaker-than-expected increase in wholesale inventories.
The big question is how inventories will perform over the next six months, and the sales data do suggest inventory growth may remain strong.
Wholesale sales rebounded, increasing 0.6% in June after falling 0.3% in May. This suggests that the growth in inventories, while lower than expected, was planned and not the result of customers leaving goods on the shelves. If sales continue in a positive fashion, we expect inventory growth to also gain strength.
The inventory/sales ratio remained at 1.16 in June.
