Wholesale Sales Dip as Inventory Builds: Durables Struggle While Nondurables Lead

The October 2025 wholesale trade data reveal a subtle softening in business activity in the face of steady—but slowing—annual growth. The MoM decline in sales of 0.4% for merchant wholesalers (excluding manufacturer sales branches/offices) indicates potential weakness in demand or a pullback in orders. Durable goods were particularly weak, with sales falling 0.6% MoM, while nondurables also declined. However, the YoY figures (up 4.6% for total wholesale sales, 5.0% for durable goods, and 4.2% for nondurables) suggest underlying strength—likely supported by inflation, ongoing restocking, and delayed orders catching up.

Inventory behavior points to increasing divergence across categories. Total inventories climbed modestly, driven by a strong nondurables component (+0.8% MoM), while durable goods inventories declined slightly. This dynamic suggests businesses building safety stocks in fast-turn nondurables, perhaps in anticipation of price volatility or supply disruptions, while holding back on slower-moving durable items.

The inventories-to-sales ratio, a key metric for assessing inventory pressure, rose slightly from 1.29 to 1.30, still lower than the year-earlier ratio of 1.33. For durable goods, the ratio is about 1.66 (down from 1.74 YoY), and for nondurables about 0.96 (versus 0.95 YoY). These readings suggest that despite the MoM increases in inventory especially for nondurables, overall inventory absorption (sales to inventory) remains tighter than last year.

Meanwhile, the manufacturing and trade combined data show sales slipping 0.2% MoM and inventories rising 0.3% MoM, yielding a combined inventory/sales ratio of 1.38 vs. 1.41 a year ago. That measure reinforces the picture that businesses remain cautious—sales momentum is faltering, while firms preserve leaner stocks compared to a year ago.

Strategic Implications

• Sectors tied to durable goods—industrial machinery, construction, capital equipment—will likely feel pressure as softness in demand drives backlogs and profitability concerns.
• Producers of nondurable goods should watch for cost pressures if elevated inventories persist without corresponding sales, especially as inflation and input costs remain volatile.
• Retailers and distributors with efficient inventory management systems may outperform, as precise alignment of stock with demand becomes a differentiator.
• Monetary policymakers will view the modest MoM declines with interest—maintained YoY growth might restrain urgency to cut rates absent accelerating deterioration.

Open Questions

• How much of the durable goods’ weakness is base-effects, geopolitical disruptions, or distribution channel stress?
• Will nondurable inventory accumulation lead to discounting or margin shrinkage if demand fails to pick up?
• What are forward expectations for sales in Q4 2025 and Q1 2026 given mixed signals from wholesale, retail, and industrial production data?
• How are supply chain dynamics—tariffs, shipping delays, labor shortages—impacting restocking behavior across sectors?