Wholesale Trade Report: How it Influences Markets

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What is a wholesale trade report? Wholesale trade report is an indicator which is used to measure the value in U.S. dollar of all merchant wholesalers’ sales and inventories. The wholesale trade means only those firms which do business to the governments, organizations, and other businesses. Since manufacturing is such a huge element of the GDP, the wholesale trade figure is a main indicator to keep the economy growing.

The data of wholesale trade shows a closer view to the consumer economy to the investors. It’s because the inventories numbers and sales can be a significant variable which gives detail of consumer trends. Investors can find out the opportunity of a production growth by looking at the ratio of sales to the inventories.

If sales growth is more slowly than the inventories, producers will have to unhurried their production in the coming months in order to avoid an overload of supply. But if the sales growth is faster than the inventories, they should make more products so that no shortages happen.

In the United States, the monthly wholesale trade report is released by the U.S. Census Bureau. It’s published on or around the 9th of every month. Data will be published about six months after the end of month and it will illustrate any corrections for the prior two reports as well. The wholesale trade report is based on a monthly appraisal of approximately 4,500 wholesale merchants includng exporters and importers all over the U.S. and the sample group is quarterly updated. Most of the companies surveyed, sell to retail business as their main source of income, while some wholesale companies do a straight selling to end customers.

The report presents three information to shareholders: monthly transactions, monthly stocks and the inventories-to-sales (I/S) ratio. All of these will be broken down into durables and non-durables and the coverage is nationwide. The most-watched-component after the Durable Goods Report is the inventories-to-sales (I/S) ratio. It’s a good variable that is able to indicate any supply or demand imbalances within the economy.

When the (I/S) shows an increasing figure, it should be met up with higher retail demand. If it’s not, then the corporate profits could be contracting, as extra cost to maintain inventory or slow production add up.  That’s why (I/S) ratio is considered as a lagging indicator. The ratio commonly gets its cyclical climax in the middle of a recession.

As long as the (I/S) report doesn’t change dramatically from month to month, it won’t elicit a huge reaction in the stock and bond markets. The biggest advantage from this report is its ability to forecast future GDP levels or its utility in researching specific industry trends. But, since the inventories values are measured in current dollar, so the price changes month to month will change the inventories values even if the supply stays constant. In other words, the monthly wholesale trade report is not potent enough to move the markets, but indeed, it’s very useful to be taken with other indicators to measure sales and demand. Further, it also helps traders predicting the quarterly GDP figures.


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