After the Dec Payroll data and all its hype, who cares about the lowly Wholesale Inventory figure right? But, inventories are the key point of focus in generating and measuring the recovery and Nov Wholesale Inventories rose 1.5% vs expectations of a drop of .3% and Oct was revised twice as high to a gain of .6%. Wholesale Inventories make up just 25% of Business Inventories which are out next week but the trend is worth watching. As sales rose 3.3%, the inventory to sales ratio fell to 1.14 from 1.17 to the lowest since July ’08 and provides a healthy backdrop for an eventual pickup in production. The gain in inventories was led by computers and groceries while auto’s (key part of inventory build story) were flat. With all this said, unless final demand picks up in a sustainable way, an inventory led recovery would just be temporary.
