Inventories are rising quickly but not as quickly as sales, the results of today's data on the wholesale sector as well as previously released data on the factory sector. Wholesale inventories rose 1.1 percent in January vs a 3.4 percent surge in wholesale sales, a mismatch that pulled the wholesale stock-to-sales ratio down two tenths to a 1.13 reading that indicates inventories are too low.
The pass through of high input costs is likely inflating both the inventories and sales readings to a degree, a price effect evident in high rates of month-to-month change for non-durable goods including petroleum products and groceries.
Previously released factory data show a 1.3 percent rise in January inventories vs a 1.8 percent rise for shipments and a 3.1 percent rise for new orders. Price effects aside, businesses are going have to pick up their pace of inventory building in order to meet production obligations, a very positive factor for the employment outlook. The business inventory report on Friday will include data on the retail sector and round out the January total.