Earlier today, following the collapse in wholesale inventories, we noted the "the second leg of the stool of main GDP drivers appears to be splintering as Wholesale Inventories dropped MoM for the first time since Dec09 (-0.1% vs +0.5% expectations). We patiently await LaVorgna's GDP downgrade." As it turns out, JPM's Daniel Silver is the first to pull the plug on the blind hope that US GDP is rising despite the rest of the world imploding, and in the process euthanising the latest iteration of the decoupling thesis which always appears to give the bulls some hope that things in the US just may be fine this time around. They never are.
Data released today on September wholesale inventories were significantly weaker than the BEA had assumed in its advance release of 3Q GDP growth and we are lowering our tracking estimate of 3Q growth by 0.7%-pts to 1.6%saar (the BEA had initially reported 2.5% growth). Wholesale inventories declined 0.1% in September to $462bn, which was the first monthly decline reported since 2009. Nondurable inventories have looked especially weak lately, falling 0.9% in September and 7.3%saar over the past three months.
The wholesale inventories data have mixed implications for 4Q growth. The contribution to growth from inventories in 4Q could be stronger than anticipated if the change in inventories reported for 3Q is revised down. However, imports could be more of a drag on 4Q growth if petroleum inventories are restocked from foreign sources; nominal wholesale petroleum inventories fell more than 25%saar over the three months through September (real inventories also appear to have declined significantly over this time). Tomorrow’s report on September foreign trade will help shed light on our growth estimates.