NEW YORK (TheStreet) -- The U.S wholesale inventories number reminds me of the quarterly earnings report from LinkedIn (LNKD - Get Report). It's a good-news, bad-news story, which may not bode well for either the U.S. economy or the businesses which depend upon it.
The good news from today's report was that inventories rose less than expected in December. The bad news is that the government may be forced to reduce its fourth-quarter gross domestic product estimate. The U.S. wholesale inventories number is a major component of the nation's GDP, and cutting that number isn't exactly encouraging for the overall economy.
That's why the Commerce Department's report, that wholesale inventories increased 0.3% after an unrevised 0.5% gain in November, sounded like telling your CPA that your income dropped last year but you won't have to pay as much in taxes.
It's also like LinkedIn telling analysts and investors last Thursday that first-quarter revenue will be $455 to $460 million, when analysts on average had projected sales of $469.4 million.The good news is that the company's stock is no longer priced at a forward one-year price-to-earnings ratio nearing 90. Currently with the shares of the company at around $203, the PE is only 80. So my suggestion to the Commerce Department is that it reach out via the vast social-business network that LinkedIn has built and ask the millions of entrepreneurs and officers what's happening with their companies' business inventories. Are their products selling faster or accumulating dust in a warehouse or storage room? The component of the latest U.S. wholesale inventories number that goes into the calculation of GDP is wholesale stocks (goods, physical products, materials to be sold), excluding autos. An increase of 0.3% in December doesn't sound like much, but its enough to motivate economists at JPMorgan and Barclays to anticipate that fourth-quarter GDP would be lowered by about 0.2 percentage points.
"We now believe real inventories increased around $119 billion in the fourth quarter," said Daniel Silver, an economist at JPMorgan in New York. "Although this is still a pretty rapid pace of inventory accumulation, our revised estimate means that inventories could be a bit less of a drag on first-quarter growth than we had previously been anticipating."In other words, it wasn't as bad as we had first dreaded. The change in wholesale inventories from the third quarter evidently adds 0.42 percentage points to the fourth-quarter's 3.2% annualized growth rate, countering economists' predictions for a slower pace of restocking, which would have weighed on output. If you're confused, you're in really good company, along with government and private economists.
Check Out Our Best Services for Investors
- $2.5+ million portfolio
- Large-cap and dividend focus
- Intraday trade alerts from Cramer
Access the tool that DOMINATES the Russell 2000 and the S&P 500.
- Buy, hold, or sell recommendations for over 4,300 stocks
- Unlimited research reports on your favorite stocks
- A custom stock screener
- Model portfolio
- Stocks trading below $10
- Intraday trade alerts