Today the Commerce Department released its report on wholesale sales and inventories during May.

In May, seasonally-adjusted wholesale sales were unchanged (+/-0.5%) from the revised April level. The year-to-year change, from May 1995 to May of this year, was 5.7 percent (+/-1.0%). The small monthly change was overwhelmed by the uncertainty in the data. But, the year-over-year data is meaningful because the 5.7 percent change was significantly larger than the uncertainty. So, we know that, since last year, wholesale sales rose somewhere between 4.7 percent and 6.7 percent.

Durable goods sales increased 0.6 percent (+/-1.0%) in the past month and were 5.1 percent (+/-2.3%) higher than a year ago. During May, sales of professional and commercial equipment were up 4.4 percent to $19.3 billion. At the same time motor vehicles and automotive equipment decreased 3.2 percent to $16.6 billion. For the nondurable goods sector, sales of farm-product raw materials were down 5.4 percent from April; but beer, wine, and distilled beverages were up 3.0 percent to $4.8 billion.

Seasonally-adjusted wholesale inventories were down 0.2 percent (+/-0.4%) since April but were 4.9 percent (+/-1.4%) above May 1995. Once again, the year-over-year change was meaningful, but the month-to-month number was statisically insignificant.

Summing up: Between May of last year and May of this year the economy expanded sufficiently to support growth of at least 4.7 percent in wholesale sales and an increase of at least 3.5 percent in wholesale inventories. The fact that inventory growth has not kept pace with sales growth may be evidence of cautiousness among wholesalers after the inventory buildups due to slow economic activity in 1995.

During May, the stock/sales ratio for wholesalers, based on seasonally adjusted data, was 1.31. This means that inventories on hand were equal to 1.31 months of sales at the current rate of sales. This ratio exceeded 1.34 from July through October last year; but, since then, it has been working its way lower.

Byline: Lafferty (MF Merlin)