- Wholesale Inventories for December rose 1.1% versus estimates of a .3% gain and an upwardly revised .8% increase in November.
BOTTOM LINE: Inventories at US wholesalers surged in December as sales declined, Bloomberg reported. Sales fell .7%, the most since January. The decline in sales brought the supply of goods on hand to 1.09 months from 1.07 months worth the prior month. The increase in wholesale inventories was led by a 9.2% rise in oil product stockpiles. The overall gain in inventories could help lead to an upward revision in 4Q GDP. The odds of a 50 basis point rate cut at the FOMC meeting next month are 68.0%, while the odds of a 75 basis point cut have risen to 32.0%. According to Intrade.com, the odds the US enters recession this year have fallen to 66.5% from 77.5% a few weeks ago. The ECRI Weekly Leading Economic Index jumped 1.83% this week back to 133.50. Despite the recent bounce higher in commodities, fueled by OPEC’s talk of oil production cuts, the 10-year TIPS spread, a good gauge of inflation expectations, is 2.29% today, down from 2.48% in November and 2.38% one week ago. I continue to believe inventory rebuilding will help boost overall US growth over the intermediate-term as exports rise to new records and companies gain confidence in future economic conditions.
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