The U.S. wholesale report beat estimates
The U.S. wholesale report beat estimates with a 1.7% August wholesale sales surge after a flat (was 0.1%) July figure, alongside a 0.9% August inventory rise that slightly undershot the 1.0% climb in the advance report. The July inventory rise remained at 0.6%. Today's big sales growth overshoot reversed the undershoot in July to leave what is still only a slow descent in the inventory-to-sales (I/S) ratio, now to 1.28, after the recession-sized I/S climb from a lean 1.19 in mid-2014 to a 1.36 expansion-high in January of 2016. Sales have been more price-sensitive than inventories through the oil boom-bust cycle, as was seen today with a huge 6.1% petroleum sales surge in the month of Harvey alongside a smaller 1.7% inventory rise. Yet the modest rise in oil prices since early-2016 has failed to bring the I/S ratio much lower from unsustainably high levels. Analysts still expect Q3 GDP growth of 3.0% with a tiny $1 B Q3 inventory addition that leaves a lean $7 B accumulation rate, after a $4.3 B Q2 contribution. Inventories have yet to recover from the big 2015-2016 petro-hit despite a factory sector recovery. Analysts expect a 0.7% August business inventory rise after a 0.3% (was 0.2%) July increase.