AP News

Ahead of the Bell: US wholesale inventories

WASHINGTON (AP) — U.S. wholesale businesses appear to be more optimistic that sales will turn around.

Those companies increased their stockpiles in July by the largest amount in five months, even though sales declined for the third straight month.

Economists expect the sales trend turned positive in August, according to a survey by Factset. They predict sales increased 0.3 percent, after a falling 0.1 percent in July.

The Commerce Department will release the report at 10 a.m. EDT Wednesday.

Companies typically boost their stockpiles when they anticipate sales will rise in coming months. Faster restocking helps drive economic growth. When businesses order more goods, it typically leads to more factory production.

In July, total wholesale inventories stood at $485.2 billion, 26.1 percent higher than the post-recession low reached in September 2009. As businesses saw demand picking up, they became more hopeful and resumed restocking to meet rising demand.

But growth has slowed this year. High unemployment and low pay increases have kept U.S. consumers from spending more freely. And a slowdown in global growth has dampened demand for U.S. exports.

Many economists believe the overall economy grew at a lackluster annual rate of 1.5 percent to 2 percent during the July-September quarter. That would be only a slight improvement from the 1.3 percent annual growth in the previous quarter.

A stronger job market could help boost growth in the final three months of the year. The government reported on Friday that the unemployment rate fell in September to 7.8 percent, down from 8.1 percent in August.

The rate fell because a government survey of households found that 873,000 more people had jobs, the biggest jump since January 2003.

Still, economists expect only modest job gains in the coming months. Businesses have been more cautious this year. In addition to weak consumer spending and slower global growth, many companies are worried about a budget impasse in Washington. If Congress fails to reach an agreement before January, taxes will increase and government spending will decline — a combination that most economists say would trigger another recession.

Stockpiles at the wholesale level account for about 27 percent of total business inventories. Stockpiles held by retailers make up about one-third of the total and manufacturing inventories represent about 40 percent of the total.

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