Adjusting Wholesale Sales And Inventory

When the estimates for factor orders were released earlier this month, there was an unusual pattern for the revision of September’s preliminary figures. Subsequent data suggested that factory orders were slightly less than had been originally calculated, yet despite that result for the unadjusted data the seasonally-adjusted estimate for factory orders in September was instead revised significantly higher. Overall, the trend being displayed in the adjusted numbers is quite different from what is indicated unadjusted.

That also seems to be the case for wholesale sales. Unadjusted wholesale sales were reported last week to have been revised up by just $275 million in September in the unadjusted series, which turned into a +$1,128 million upward revision to the SA series. For October, the month-over-month gain for wholesale sales was a sharp 1.4%, nearly 2% year-over-year. The unadjusted estimate, however, was a much different result even to the point of a different sign, down 0.8% also year-over-year.

Going back to February, wholesale sales have been essentially flat year-over-year in the unadjusted series, but with a negative tendency. Sales were up less than 1% in February and March 2016, during the worst of this year’s start, before falling rather sharply (-5.4%) in April. Sales were flat again in May and June (+0.3%, -0.7%, respectively) before dropping 6.7% in July and rebounding by 6.6% in August, essentially no growth to start summer. The last two months of estimates, for September and October, are back to flat again (0.6%, -0.8%, respectively).

After contracting throughout 2015, flat in 2016 means the economy fell – and then failed to get back up again. That is consistent with the data we find elsewhere, including, importantly, the broad survey of labor statistics outside the isolated unemployment rate. The seasonally-adjusted data for wholesale sales, like factory orders, however, delivers, again, a very different impression.