Wholesale inventories rose 0.4 percent in March but are far below the 2.4 percent rise in sales, a mismatch that pulled the inventory-to-sales ratio down 3 tenths to a record low of 1.13. This mismatch is not due to price swings but is fundamental and reflects company reluctance to build stocks as the durables ratio fell 2 tenths to 1.50 vs. a 3 tenth slide for non-durables to 0.83.
But the durables side does show solid evidence of accelerating build with inventories up 0.8 percent on top of a 0.6 percent rise in February. Inventories of metals, computers, electrical goods, lumber and autos all rose. Wholesale sales of durables show wide and more significant gains led by lumber, metals, furniture and machinery. The rise in lumber and furniture sales points to improvement in the housing sector while metals and machinery point to improvement in the industrial sector.
Inventories of non-durables slipped 0.2 percent showing big draws in farm products and paper products. On the sales side, non-durables jumped 2.8 percent reflecting increases in petroleum, drugs and alcohol.
Factory inventories have begun to build and so are wholesale inventories, though the rate of increase is lagging the increase underway in sales as companies hold on as long as they can to fat profit margins. Retail inventories have also been inching higher though the heavy sales in March may have drawn down inventories in the sector.