The U.S. wholesale report undershot estimates
The U.S. wholesale report undershot estimates for sales, with a 0.1% June drop after a downwardly-revised 2.1% (was 2.5%) May surge. Wholesale inventories posted a 0.1% June rise that exceeded the flat figure in the advance report, but the May gain was revised down to 0.3% from 0.4% to leave that figure a smidgen below assumptions as well. Sales growth undershot inventory growth in June after four straight months of the opposite pattern, hence capping the downward pressure on the inventory-to-sales (I/S) ratio, which remained at 1.25. Despite today's disappointment, strength in the Q2 wholesale data, with sales strength for food and oil and an inventory plunge for food, may reflect efforts to front-run new tariffs. Analysts still expect a Q2 GDP growth trimming to 4.0% from 4.1%, with downward bumps of $1 B for wholesale inventories, $1 B for equipment spending, $2 B for residential construction and $1 B for public construction, but assumed boosts of $1 B for net exports and $1 B for factory inventories. Analysts expect Q3 GDP growth of 3.5%, with a $44 Q3 inventory addition that mostly reverses the $58.3 B Q2 subtraction, leaving a Q3 accumulation rate of a lean $16 B. Analysts expect a 0.1% June business inventory rise after a 0.4% May gain.