Against expectations of a further rise in inventory build of 0.7%, wholesale inventories rose only 0.3% in June (the same pace as in May) missing by the most since February 2013. With GDP now basically an exercise in inventory expansion and contraction (Q2 inventory estimate amounte to 40% of GDP) [4], this 'miss' offers little hope for the initial Q2 rebound to hold its exuberance. In addition, wholesale sales also missed (up only 0.2% against expectations of a 0.7% rise) with growth slowing for the 3rd month in a row.
Inventories miss significantly...
[5]
And sales slow dramatically...
[6]
and here's why Q2 GDP estimates will fall...as we note before...
The result is that of the $675 billion rise in nominal GDP in the past year, a whopping 52%, or over half, is due to nothing else but inventory hoarding.
[7]
Once again, enjoy the sugar high that inventory accumulation always generates in the current quarter. Just don't expect it to last.
Charts: Bloomberg
