The U.S. wholesale report slightly underperformed
The U.S. wholesale report slightly underperformed with 0.2% August inventory drop that undershot a 0.1% decline in the advance indicators report, following a 0.1% July decline, though analysts did see a 0.7% August sales rise that more than reversed a 0.6% (was 0.4%) July drop. Both inventories and sales weakened in Q3 after a Q2 bounce from weak Q1 levels, with gyrations that have mostly tracked commodity prices. More generally, sales have been more price-sensitive than inventories through the oil boom-bust cycle, leaving a recession-sized climb in the inventory-to-sales (I/S) ratio from 1.20 in mid-2014 to a 1.37 expansion-high in January, before a drop-back since then to the current 1.33. Analysts still expect Q3 GDP growth of 2.5% with a tiny -$1 B inventory subtraction that should leave the liquidation rate near the $9.5 B Q2 pace, following the big $50.2 B inventory subtraction in Q2 that marked a fifth consecutive quarterly subtraction. Analysts expect a 0.2% August business inventory rise after a flat July figure, with a 0.2% rise for factories and an assumed 0.5% retail inventory increase that matches the figure from the advance indicators report.