Bloomberg News

U.S. Wholesale Inventories Rose Less Than Forecast in April

June 09, 2011

June 9 (Bloomberg) -- Inventories at U.S. wholesalers rose less than forecast in April, restrained by the biggest drop in auto stockpiles in more than a year.

The 0.8 percent increase in inventories compared with a 1 percent gain median forecast in a Bloomberg News survey and followed a revised 1.3 percent increase in March that was larger than initially estimated, Commerce Department figures showed today in Washington. Sales increased 0.3 percent in April after climbing 3 percent the prior month.

The slowdown in demand may prompt wholesalers to keep a tight rein on stockpiles, a sign orders to producers will diminish as companies assess the expansion’s durability. Auto inventories decreased by 1.3 percent, the biggest decline since December 2009, which may reflect the influence of the earthquake and tsunami in Japan.

“They’re just trying to keep inventories at the wholesale level as lean as possible,” Nigel Gault, chief U.S. economist at IHS Global Insight Inc. in Lexington, Massachusetts, said before the report. “The trend is for these inventories to become smaller and smaller relative to total sales.”

The median projection was based on a survey of 32 economists. Estimates ranged from an increase of 0.5 percent to 1.5 percent. The March reading was revised from a previously reported 1.1 percent increase.

Other reports today showed the trade deficit unexpectedly narrowed in April, reflecting a plunge in auto and oil imports combined with record exports, jobless claims rose last week and consumer comfort improved.

Trade Gap Shrinks

The trade gap shrank 6.7 percent to $43.7 billion, the lowest since December, Commerce Department figures showed. Purchases of goods from Japan dropped by a record $3 billion in the aftermath of the earthquake and tsunami.

Applications for unemployment insurance benefits increased by 1,000 to 427,000 in the week ended June 4, Labor Department data showed.

Consumer confidence rose last week for the third consecutive time as lower gasoline prices lifted Americans’ outlook on their finances. The Bloomberg Consumer Comfort Index climbed to minus 45.9 in the period to June 5, the best showing since the end of April, from the prior week’s minus 47.1. Across income groups, sentiment improved the most among households making less than $50,000 a year.

Durable Goods

Wholesalers’ stockpiles of durable goods, or those meant to last several years, increased 0.8 percent in April, led by metals, furniture and electrical equipment, today’s report showed. Demand for durable goods fell 0.6 percent, also led by metals and furniture, indicating some of the buildup in stockpiles for those categories was unintentional.

The value of unsold non-durable goods inventories also increased 0.8 percent as purchases climbed 0.9 percent.

At the current sales pace, wholesalers had enough goods on hand to last 1.14 months in April, close to the 1.13 months reached in March.

Inventory rebuilding, a major driver of the early stages of the economic recovery, sped up in the first quarter, contributing 1.2 percentage points to gross domestic product, according to the Commerce Department data.

“We’re cautiously optimistic about the second quarter and we will continue to manage expenses in inventory conservatively,” Diane Neal, chief executive officer of Limited Brands Inc.’s Bath & Body Works chain, said during a May 19 call with analysts. The fragrance and soap business reported sales rose 4 percent in May at stores open more than a year, compared with the 7 percent analyst estimate.

Raising Prices

More expensive cotton, oil and labor in Asia have forced some chains to pass costs on to consumer, straining demand. Limited, which also operates the Victoria’s Secret chain, posted a gain of 6 percent in same-store sales, missing the 7.4 percent average of analysts’ estimates compiled by Retail Metrics Inc. The Columbus, Ohio-based company had topped forecasts each month since at least the beginning of 2010.

Wholesalers make up about 30 percent of all business stockpiles. Factory inventories, which comprise about 38 percent of the total, grew 1.3 percent in April, the Commerce Department said June 2. Retail stockpiles, which make up the rest, will be included in the June 14 business inventories report.

--Editor: Carlos Torres

Company news:

To contact the reporter on this story: Alex Kowalski in Washington at akowalski13@bloomberg.net

To contact the editor responsible for this story: Christopher Wellisz at cwellisz@bloomberg.net


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