Under the Hood of U.S. Wholesalers Is Huge Q1 Inventory Drag

Here’s one key takeaway from the Commerce Department’s report Friday on February wholesale inventories: There’s going to be a much bigger drag on first-quarter U.S. gross domestic product from diminished stockpiling than most economists forecast before the report.

* The 0.5 percent drop in inventories was the biggest since May 2013 and the previously reported 0.2 percent gain in January was revised away to show a 0.2 percent drop. That prompted economists at JPMorgan Chase & Co. in New York to lower their tracking estimate of first-quarter growth to 0.2 percent from 0.7 percent before the report.

* Sales declined in February for a fourth consecutive month, meaning that even though stockpiles are falling, wholesalers’ inventory-to-sales ratios remain elevated (February’s 1.36 months’ supply was just shy of the 1.37 months in January that was the highest since the last recession.)

* The problem of still-bloated stockpiles is most acute among distributors of non-durable goods. The inventory-to-sales ratio for petroleum wholesalers climbed to a record in data going back to 1992. (Caveat: these figures aren’t adjusted for prices, so slump in energy costs could be influencing the data.)

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