US Trade Balance and Preliminary Wholesale Inventories Mixed

Alan Penny

29 January 2020

3 min read

Wall Street sign

  • Trade Balance shows exports slow
  • US wholesalers burning through inventory
  • United States still leads the way

Early during Wednesday, the United States released a couple of mid-level numbers that continue to paint a mixed picture when it comes to the United States economy. This is yet another sign that, perhaps, the global economy itself is starting to slow down.

perhaps, the global economy itself is starting to slow down

When looked at through the prism of global trade, it seems that the United States is continuing to import quite substantially, which does help the other markets. But it also shows that the United States remains stronger than many of the others.

The Wholesale Inventories number fell slightly, as opposed to building up. That gives the impression that the US consumer continues to lift the economy as inventories drop.

The numbers suggest a lot of imports happening

The Goods Trade Balance figure was $-68.3 billion against the anticipated $-64.5 billion figure, indicating that there is considerable importing going on. This suggests that exports are slowing, which on the one hand means that the US consumer is still relatively strong as they pick up imports.

On the other hand, it shows that the United States is having trouble selling its exports overseas. This implies that the US still has a relatively strong consumer, but the rest of the world isn’t strengthening very quickly.

Furthermore, the Preliminary Wholesale Inventories number shows a reading of -0.1% as opposed to the 0.1% that was expected. This inventory is being worked through at wholesalers, suggesting that somebody out there is buying. The natural second derivative conclusion will be that the US consumer is the buyer there as well.

These results support the idea of the US continuing to lead the rest of the world, and perhaps trying to drag them up with it in economic terms.

However, there’s only so much the US can do, so there has to be some type of movement by places like Europe and Asia. In fact, Europe is more than likely the main culprit in the drain, based on other data points released recently.

US consumer is hungry for goods

The main takeaway here is that the US consumer continues to show a steady appetite for buying goods, while the rest of the world is struggling to keep up the pace. This favors the United States via the stock market yet again, as it has for some time.

Ultimately, this is a market that will continue to see monetary flow into Wall Street and away from other indices on relative valuation. It could also continue to favor the US dollar until the rest of the world picks up.

Granted, these are relatively mid-range figures, but it does solidify the concept that the US is still leading the rest of the world by a wide margin. As fundamental investors look at all the data points, the conclusion remains the same as it has been for several months.

Written By
Alan Penny

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