- U.S. wholesale inventories fell 0.5% in December 2024 (−0.1% YoY), in line with expectations.
- Wholesale sales rose 1.0%, pushing the inventory-to-sales ratio down to 1.31 months near the lowest since 2013.
- The decline was broad, led by durables (−0.6%) and a smaller drop in nondurables (−0.2%) with petroleum and a few other categories higher.
- Lower inventories weighed on Q4 2024 GDP, contributing to growth slowing to about 2.3% from 3.1% in Q3.
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The decline in wholesale inventories in December 2024—0.5% month-over-month and 0.1% year-over-year—signifies a sustained pullback of stock from merchant wholesalers. With wholesale sales rising 1.0% in December (after 0.9% in November), wholesalers moved goods faster than they replenished them. This dynamic is reinforced by the inventory/sales ratio dipping to 1.31 months, the lowest in over a decade. Such trends typically indicate either strong final demand drawing inventories down, or cautious restocking amid rising uncertainty.
Diving into product types, durable goods inventories dropped more sharply (−0.6%), driven by electrical equipment (−1.6%) and lumber (−0.9%), whereas nondurable goods experienced a more modest decline (−0.2%). Some nondurables (petroleum +8.1%, farm products +2.2%, paper +1.2%) bucked the trend, pointing to category-specific supply chain or demand anomalies.
From a macro perspective, declining inventories subtract from GDP under the investment component. In Q4 2024, private inventory investment was a drag on economic growth, contributing to the slowdown from 3.1% in Q3 to 2.3% annualized growth in Q4.. The combination of rising sales and falling inventories signals strong demand in end-markets, but also could portend production constraints if restocking does not resume, potentially setting the stage for supply-side inflation or tighter capacity utilization.
Strategically, businesses and markets should watch indicators such as restocking behavior in early 2025, movements in durable vs nondurable sectors, and shifts in the inventory-to-sales ratio. A sustained low ratio could prompt firms to increase production, invest in capacity, or face stock-outs. Conversely, if demand softens, the current lean inventory state could lead to volatility in supply chains.
Open questions include whether the declines are temporary due to end-of-year seasonality, whether interest rates or financing costs are suppressing restocking, and whether the categories with inventory gains signal future excess supply or just timing lags. Another key risk: tight inventories could limit trade leverage/speculative margins if demand unexpectedly surges.
Supporting Notes
- Wholesale inventories declined 0.5% in December 2024, matching economist expectations; November saw a 0.1% decline.
- Inventories were down 0.1% year-over-year in December.
- Wholesale sales increased 1.0% month-over-month in December, following a 0.9% rise in November.
- Inventory/sales ratio at merchant wholesalers fell to 1.31 in December, down from 1.33 in November and well below past highs.
- Durable goods inventories dropped 0.6%; electrical equipment (−1.6%) and lumber (−0.9%) were especially weak.
- Non-durable goods inventories fell 0.2%; grocery, apparel, and drugs each dropped about 1.5-1.7%. Offsetting gains included petroleum (+8.1%), farm products (+2.2%), and paper (+1.2%).
- GDP growth slowed to 2.3% annualized in Q4 2024, in part because private inventory investment was a drag; Q3 had seen ~3.1%.