Showing all posts tagged #monthly-activity:


US wholesale inventories led growth to be revised down by about one tenth in Q3 and Q4

Posted on December 10th, 2015


Main takeaways:
  • Lower than anticipated wholesale inventories in October and downward revisions to the previous month led analysts to adjust GDP growth estimates slightly down in Q3 and Q4 by about one tenth. GDP growth tracking for Q4 is in the 1.5% to 2.0% range.
  • Wholesale sales are moving sideways (current prices) after a sharp drop earlier this year.
  • However, adjusting for prices, wholesale sales are now back to trend.
  • Inventory buildup is mostly due to petroleum.


The chart below shows that retail, wholesale and manufacturing sales, all slowed down materially since mid-2014.
Retail sales excluding gasoline is still growing at a reasonable pace (see US Retail Sales -- trend remains unchanged Oct/2015)
So, let's take a closer look at wholesale sales.


Part of the slowdown in wholesale sales is clearly due to price effect. Adjusting for falling prices, wholesale sales were roughly flat from late 2014 to mid 2015 and now appears to be back to the trend observed since 2009.

Another frequent concern is the inventory buildup at wholesalers. The chart below show that the inventory to sales ratio has increased sharply in the last three quarters.

But a similar price effect might be distorting oil inventories. Excluding autos, farm, and petroleum, the rise in the inventory-to-sales is less pronounced.


US September durable goods report was weak, but hints at improving capex

Posted on October 27th, 2015

Main takeaways:
  • Weaker than expected report + negative revisions => further negative revisions to growth in Q3.
  • Manufacturing shipments and orders of (core) durable goods peaked one year ago.
  • But shipments of (core) capital goods have already bottomed -- this hints at improving capex.
  • Most of the drop in (core) durable goods is due to primary metals (iron and steel mills) and machinery (farm, mining, oil field and gas field). Machinery shipments and orders appear to have bottomed.


September durable goods repor was weaker than expected and revisions to August were to the downside.
The report paints a weak picture for overall manufacturing but suggests some pickup in corporate capex from Q2.

Total manufacturing shipments of durable goods excluding the volatile groups transportation and defense -- the core durable goods -- have peaked last September and show no sign of improvement in the near term. New orders also do not suggest an improvement.


But when looking at the breakdown, it is clear that most of the decline in manufacturing durable shipments results from the group primary metals, which includes iron and steel mills.

The chart below shows the decline in shipments (in $bn, current prices) in the last one year and in the last six months (annualized). Most of the drop in core durable goods can be traced to the primary metals group. The group machinery is being hit by a drop in farm and mining, oil field and gas field machinery. But this category has shown an improvement in shipments in the last 6 months.


The above chart also shows core capital goods shipments have improved in the last six months. This is a positive sign, since core capital goods is a proxy for corporate investment.

The year-over-year performance of core capital goods shipments points to a weaker annual growth for investment in the Q3 (see chart below).


But the quarterly improvement in core capital goods shipments suggests a pickup in investment compared to the second quarter.

The chart below shows the quarterly association of core capital goods shipment and equipment investment. It suggests a rebound in capex from near zero in Q2 to about 4% in Q3.

The new orders data from the ISM manufacturing report suggest the weakness in durable goods orders might be overdone.



Detailed chart pack

In all the following charts, shipments measure the dollar value of products sold by manufacturing establishments and new orders are intention to buy for immediate or future delivery. Unfilled orders (or order backlog) are the inventory of open orders to be delivered in future periods, and inventories represent the value of end-of-month stock regardless of stage of fabrication.


US Core* Durable Goods (*excluding transportation and defense)

Durable goods orders and shipments peaked one year ago (Sep/14).
Inventories peaked in the first quarter.

Unfilled orders peaked in March and have been sideways since then.

Inventory to sales ratio roughly sideways after a build up in Q4 14 and Q1 15.




US Core Durable Goods (with unfilled orders)




US Core* Capital Goods (* excluding defense and aircraft)
Core capital goods (a proxy for capex) suggest 3Q could be a bit better than 2Q.










US Wholesale Trade Sales and Inventories (Jul/2015)

Posted on September 10th, 2015


Main takeaways:
  • Wholesale sales are moving sideways (adjusted for prices)
  • Inventory buildup is mostly due to petroleum; nevertheless an inventory correction is widely expected for the third quarter.
  • Analysts reduced 3Q growth forecasts by 0.1 to 0.3pp accounting for lower inventories.



The chart below shows that retail, wholesale and manufacturing sales, all slowed down materially since mid-2014.
Retail sales have already rebounded and it is clear that most of its slowdown was related to the fall in gasoline prices (see US July/15 Retail Sales -- good).
So, let's take a closer look at wholesale sales.


Part of the slowdown in wholesale sales is clearly due to price effect. Adjusting for falling prices, wholesale sales appear to have stabilized in the last couple of quarters.

Another frequent concern is the inventory buildup at wholesalers. The chart below show that the inventory to sales ratio has increased sharply in the last three quarters.

But a similar price effect might be distorting oil inventories. Excluding autos, farm, and petroleum, the rise in the inventory-to-sales is less pronounced.




Details: charts below break wholesale data into nondurable and durable sectors.

Nondurable






Durable









Total wholesale





Paulo Gustavo Grahl, CFA

Random comments on macro data. Views are my own. Except when they aren't.