In July 2025, US wholesale sales grew by 1.4%, exceeding the expected 0.2% increase. The sales had previously risen by 0.3%. Inventories increased by 0.1% in July, slightly down from the previous rise of 0.2%.

Economic Impact

Even though this report is not a top priority, inventory figures are important for GDP calculations. These numbers can lead to significant short-term changes because of stockpiling and de-stocking tied to tariffs. The July wholesale figures were much stronger than anticipated, showing a large increase in sales. This strong demand, along with a smaller-than-expected increase in inventories, indicates a healthy economic outlook for the third quarter. It suggests that businesses are effectively selling their products instead of letting them gather dust. This data becomes more meaningful when we consider the overall economic climate. The August jobs report was solid, and core inflation has stuck above 3% for the last quarter. Strong underlying demand will likely make the Federal Reserve cautious about predicting any future interest rate cuts.

Investment Strategies

For derivative traders, this points to a “higher for longer” scenario regarding interest rates. We should expect more volatility in interest rates, and pricing for Fed funds futures may shift, lowering the chances of a rate cut in early 2026. This situation makes long-term call options on interest rate futures a risky choice right now. This is a stark contrast to the large inventory builds during the supply chain issues of 2022 and 2023. Back then, stockpiling indicated uncertainty, but today’s data suggest a healthy cycle with strong final demand. The inventory-to-sales ratio has recently dropped to 1.32, well below the 1.45 levels seen during those unstable times. This underlying strength could be a sign to consider call options on cyclical sector ETFs, such as industrials and consumer discretionary, that benefit from a strong economy. On the other hand, it might be wise to buy protective puts on interest-sensitive sectors like technology and utilities. The possibility of sustained higher interest rates is a significant challenge for those groups. Create your live VT Markets account and start trading now.

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