Tim Quinlan, Economic Analyst

tim.quinlan@wachovia.com ● 704-374-4407

February 10, 2009

Wholesale Inventories Fell 1.4 Percent in December

Wholesale inventories fell for a fourth consecutive month in December – the longest run of consecutive declines in
more than five years. The 1.4 percent decline was more than the consensus expected and suggests that wholesalers
are doing everything they can to decrease stockpiles even as the decline in sales outpaces the decline in inventories.
Inventories are Falling, But not as Fast as Sales Inventory-to-Sales Ratios
• This is the latest evidence of the difficult environment for • The result is an inventory to sales ratio that is climbing at a
business spending in Q4. Demand has all but vanished and startling rate. Further production cuts seem likely.
businesses are scrambling to right-size their inventories. • Automotive inventories rose 1.7 percent in December, as sales
• While wholesalers are trying to pare back inventories, sales fell 8.1 percent reflecting the ongoing struggles in the sector.
have cratered in recent months and are falling at an even Inventory-to-sales ratios are skyrocketing, suggesting
faster rate than inventories. unintended inventory build.

Wholesale Inventories Inventory-to-Sales Ratio

Month-over-Month Percentage Change Wholesalers
1.8% 1.8% 1.40 1.40

1.5% 1.5%
1.35 1.35
1.2% 1.2%
1.30 1.30
0.9% 0.9%

0.6% 0.6% 1.25 1.25

0.3% 0.3%
1.20 1.20
0.0% 0.0%

-0.3% -0.3% 1.15 1.15

-0.6% -0.6% 1.10 1.10

-0.9% -0.9%
1.05 1.05
-1.2% -1.2%
Inventories: Dec @ -1.4% Ratio: Dec @ 1.27
-1.5% -1.5% 1.00 1.00
2003 2004 2005 2006 2007 2008 93 95 97 99 01 03 05 07 09

Wholesalers' Inventories & Sales Inventory-to-Sales Ratio

Year-over-Year Percent Change -- 3-Month Moving Averages Automotive Wholesalers
20.0% 20.0% 2.40 2.40
2.30 2.30
15.0% 15.0%
2.20 2.20
2.10 2.10
10.0% 10.0%
2.00 2.00

5.0% 5.0% 1.90 1.90

1.80 1.80
0.0% 0.0% 1.70 1.70
1.60 1.60
-5.0% -5.0%
1.50 1.50
1.40 1.40
-10.0% -10.0%
Inventories Yr/Yr % Chg: Dec @ 5.7%
1.30 1.30
Sales Yr/Yr % Chg: Dec @ -5.4% Ratio: Dec @ 2.31
-15.0% -15.0% 1.20 1.20
93 95 97 99 01 03 05 07 09 93 95 97 99 01 03 05 07 09

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