U.S. wholesalers and distributors increased their sales in February, especially of durable goods. But surveys of businesses and consumers reveal negative sentiments that could show up in slower wholesale sales in the months ahead, and possibly a recession, experts say.
The hard data Chausovsky refers to include the February wholesale trade report from the U.S. Census Bureau, which he calls “relatively positive.” He says economic momentum picked up after the November election of President Donald Trump fueled expectations of pro-business policies, including deregulation and tax cuts. But business sentiment, Chausovsky says, has taken “a major hit” since Trump began laying out his plans for extensive tariffs in February and March.
Overall, wholesale sales reached $902.3 billion in February, an increase of 2.4% over January and 4.3% compared to February 2024. Growth was particularly strong in durable goods—which includes such categories as automotive, machinery, computers and hardware products used by plumbing and HVAC contractors. Those durable goods sales were up 3.4% over the prior month and 6.6% over the previous year.
Natarajarathinam says the unexpectedly strong growth in durable goods could be related to tariff volatility. “Customers believe that if they buy now, they can access inventory that is probably significantly cheaper than the higher-priced ones in the future,” she says.
Inventory levels remain above pre-pandemic levels, Chausovsky says. But he says it’s a positive sign that the ratio of inventory to sales is decreasing, an indication that increased sales are drawing down the stock wholesalers and distributors are holding in their warehouses.
For the wholesale industry as a whole, the inventory/sales ratio dropped to 1.30 in February from 1.32 in January 2025 and 1.34 in February 2024. The decline was steeper in durable goods, which fell to 1.69 in February from 1.74 the month before and 1.79 a year earlier.
Chausovsky says it’s important to look at these results by product category, as they vary significantly. For example, he notes that the inventory/sales ratio in the lumber sector increased to 1.79 in February from 1.70 in February 2024, while there was a year-over-year decline in the plumbing and HVAC hardware category to 2.08 from 2.22
Distributors “need to look at data specific to their industry,” he says.
Falling Sentiment and Recession Fears
Despite the solid February wholesale numbers, Chausovsky says several recent surveys of businesses and consumers suggest slower economic growth, and possibly a recession, could lie ahead. Among those indicators are:
- The Small Business Optimism Index compiled by the National Federation of Independent Business fell to 97.4 in March from 100.7 in February, the largest one-month decline since June 2022, and a sharp falloff from the post-election high of 105.1 in December 2024.
- The University of Michigan’s consumer sentiment index fell to 50.8 in April, a decline of 10.9% from March and 34.2% from April 2024.
- Factory activity in the Mid-Atlantic region fell to minus 13 in April from minus 4 in March, according to the activity index maintained by the Federal Reserve Bank of Richmond. A reading below zero indicates a decline in factory operations.
Chausovsky says an economic downturn can be avoided if the Trump administration moves in the next few months to ease fears raised by some of its policies, such as on tariffs, leading to a stock market rebound.
“But if uncertainty extends into the second half of the year, we’ll have a steeper hill to climb,” he says. “There will not be much time to shake off the disruption costs caused by the uncertainty of the last few months, and we’re likely to see a recession, not only in the macro economy but also in distribution.”
Natarajarathinam of Texas A&M says distributors likely face a period when they will seek new sources of supply, which could raise their costs and lead to some companies offering fewer products.
“Distributors are very cautious now about the possibility of a mild recession and the dollar losing its value,” she says. “This would mean less capital spending until when there is greater clarity.”
What should distributors do to prepare for a falloff in business?
“If you see the hard data turning in the way the soft data has started to it’s time to ask yourself some questions that are more recession-minded in nature,” Chausovsky says. “What kind of plans do I need to make if sales are off by 5%, 10% or 20%? What levers are available for me to pull if one of those scenarios takes place?”
He recommends distributors make sure they have adequate lines of credit in place to carry them through a rough patch and that they increase communication by 50% with their suppliers and customers. He also advises every company to look at their profitability by product and customer, and consider walking away from lines of business and customers that aren’t delivering profits.
“You’re in business to make a profit,” he reminds distributors, “not to grow revenue.”
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Don Davis, former editor-in-chief of Internet Retailer magazine and Vertical Web Media, is a freelance writer based in Chicago. His experience in retail and distribution goes back to his childhood when he worked in the toy wholesale business founded by his father and two uncles and in their discount department stores located throughout the New York metropolitan area.