Wholesale Sales Dip; Inventories Rise

Wholesale trade is off to a tough start for 2014, according to a Commerce Department report (link opens a PDF) released today.

After inching up a revised 0.1% for December, wholesales sales dropped a seasonally adjusted 1.9% to $432.5 billion in January. That's the largest decline since March 2009, when the economy was in recession.

While wholesale trade is used as an indicator of economic strength, investors pay close attention to durable goods as a potential sign of more sustainable confidence (or lack of confidence). For January, durable goods sales fell 0.4% month-over-month after flat-lining for December. Furniture took the largest dip (-1.2%), followed by professional equipment (-1%).

Nondurable goods sales fell even further, down 3.2% due primarily to a 7.5% drop in petroleum sales.

Investors also keep a close eye on inventories. For January, overall inventories grew 0.6%, exceeding analysts' 0.4% expectations. Rising stockpiles boost economic growth because they reflect increased production at factories, a sign that wholesalers anticipate a stronger economy.

. To understand the rate at which goods are being made and sold, economists compute an inventories/sales ratio. Since sales fell and inventories expanded from December to January, the inventories/sales ratio jumped 0.02 points to 1.20.

Source: Census.gov.

Year-over-year metrics indicate steadier balanced growth. Sales are up 3.9% from January 2013, while inventories have grown just 3.6%. The January 2013 sales-to-inventories ratio stood at a slightly higher 1.21.

-- Material from The Associated Press was used in this report.

The article Wholesale Sales Dip; Inventories Rise originally appeared on Fool.com.

Try any of our Foolish newsletter services free for 30 days. We Fools may not all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy.

Copyright © 1995 - 2014 The Motley Fool, LLC. All rights reserved. The Motley Fool has a disclosure policy.