Wholesale Trade Report April 2010

Wholesale trade data was reported today, and the report was positive enough. However, The Greek remains cautious as we look for signs of double-dip... and I ain't talking ice cream! Though I sure do like ice cream! (Guess my favorite flavor - win a mention)

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Wholesale Trade Report April 2010

The government published its Wholesale Trade Report for April 2010 this morning, with the pace of sales growth exceeding that of inventory growth again. This took the inventory-to-sales ratio down to 1.13, from a revised March level of 1.14. Inventory-to-sales is now fully adjusted back to normal trend line, after spiking sharply when sales tailed off and inventories built up. Inventory versus sales is at a historically low point now, but is not representative of economic acceleration, in my view.

Wholesalers posted sales growth of 0.7% in April over March sales. Sales of durable goods surged 2.0%, but were surpassed by a 9.1% increase in the sales of lumber and construction materials. For the millionth time, April 30 marked a key deadline for first-time homebuyers and spurred activity. Construction spending increased though (not necessarily expected on the tax incentive), which led some industry experts to take a second look at the long thought dead builders (read NYSE: TOL, NYSE: HOV, NYSE: BZH etc.). Sales of non-durables were down 0.4%, but that was due to the date Easter fell upon this year (driving excessive growth in March, taking from April). Petroleum product sales were down 3.5% from March - this is almost always a price change issue.

Inventories grew 0.4% over the prior month, missing economists' expectations for a 0.5% increase. If we are looking for an indication of a healthy economic situation, mark down the point when inventories start to exceed prior year counts. That's because growing demand will be driving new data, and whether the prior year count includes excess or not really will not matter. It would be a good sign to see demand driving now-cautious businessmen into stocking up again. Inventory levels were still down 3.2% from last April's stocks, so I'm not psyched.

Inventories of computer and computer peripheral equipment and software were up 3.8%. Windows 7, replacement demand for computers, and the pace of technological advancement are the likely drivers here, in my view.

Despite the decent wholesale trade report for April 2010, I'm still cautious with regard to positive economic indications, as I have real concern about a double-dip recession here. Often times, if not always, the economy backtracks after the first quarter or two of expansion, and considering the depth of the latest recession, it seems obvious we should see that this time around too. We are contending with what seems like anchored unemployment, which has got to impact consumption as families living off unemployment insurance extensions fear government spending cuts that might cut them off soon. I think spending has got to tail off through summer. And as I look overseas and see Europe engaging in the exact activity that led the US into The Great Depression (tight government budget management versus spending to drive growth), my hope only wanes. Meanwhile, the Iran situation edges closer and closer toward a real engagement, versus the anticipation of my lifetime. I see little reason to be enthusiastic now, except for my faith. What's my favorite ice cream ladies?



Editor's Note: This article should interest investors in BJ's Wholesale Club (NYSE: BJ), Costco (Nasdaq: COST), Home Depot (NYSE: HD), Lowes (NYSE: LOW), Lumber Liquidators (NYSE: LL), Overstock.com (Nasdaq: OSTK), Toll Brothers (NYSE: TOL), NYSE: HOV, NYSE: BZH, NYSE: BAC, NYSE: FRE, NYSE: FNM, NYSE: LEN, NYSE: PHM, NYSE: NVR, NYSE: GFA, NYSE: MDC, NYSE: CTX, NYSE: KBH, NYSE: RYL, NYSE: MTH, NYSE: XIN, NYSE: BHS, NYSE: SPF, NYSE: MHO, NYSE: OHB, NYSE: WCI, NYSE: RHI, NYSE: KFY, NYSE: MAN, Microsoft (Nasdaq: MSFT), Apple (Nasdaq: AAPL), Hewlett-Packard (NYSE: HPQ), Dell (Nasdaq: DELL), Best Buy (NYSE: BBY), Nasdaq: PALM, Research in Motion (Nasdaq: RIMM), Amazon.com (Nasdaq: AMZN), NYSE: AMD, Nasdaq: INTC.

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