Wholesale Inventories Drop Brings Restocking Hope

Wholesale inventories posted a fairly decent drop in the May, which may create further room for improved restocking activity into and exiting the summer months. Inventories were down by 0.5% at the wholesale level, versus a Bloomberg and Dow Jones consensus estimate of a gain of 0.3%. Today's report appears to be the largest monthly draw-down going back to September of 2011.

What stands out is that the drop in inventories was due to stronger wholesale sales, a gain of 1.6%. This again may lead many to believe that a restocking trend can be seen here, into and out of the summer months. The stocks-to-shipment ratio dropped to 1.18 as a result of the stronger sales, and this was the lowest reading in just over a year.

Strong draw-downs were seen in lumber, farming, metals and machinery. Restocking now seems likely, considering that inventories had been building in both April and March. Unfortunately, after four days of gains the equity market remains soft and all eyes are on the FOMC minutes due this afternoon.

The S&P 500 is down right at four points at 1648.40, and the DJIA is down 41 points at 15,259 in late morning trade.

Filed under: Economy