Bloomberg News

U.S. Wholesale Inventories Increase 0.4% as Sales Fall 0.1%

March 09, 2012

Inventories at U.S. wholesalers rose less than forecast in January as companies worked to keep stockpiles in line with slowing demand.

The 0.4 percent advance in stockpiles followed a revised 1.1 percent gain in December, Commerce Department data showed today in Washington. Sales fell 0.1 percent, the first decline since May, following a 1.4 percent gain in December.

At the current pace of selling, wholesalers had enough goods on hand to last 1.15 months, the same as in the prior five months, the report showed. Inventory rebuilding, which helped the economy grow last quarter at the fastest pace in more than a year, may contribute less to the expansion in early 2012.

“Inventories now appear to be in pretty good shape, certainly not bloated, but not too tight either,” Russell Price, a senior economist at Ameriprise Financial Inc. in Detroit, said before the report. “Changes in business inventories should be a modestly positive contributor to GDP over the next several quarters as inventory levels are kept in balance with demand growth.”

Median Projection

The median projection in a Bloomberg survey of 34 economists was for a 0.6 percent gain. Estimates ranged from a 0.2 percent gain to a 1.4 percent increase. The December figure was revised from a previously reported 1 percent gain.

Wholesalers’ stockpiles of durable goods, or those meant to last several years, increased 0.8 percent, boosted by automobiles and machinery, today’s report showed. Sales of durable goods declined 0.2 percent, weighed down by metals and machinery. Car sales rose 2.4 percent.

The value of unsold non-durable goods fell 0.2 percent as sales declined 0.1 percent. Demand for clothing fell 1.4 percent.

The economy grew at a 3 percent annual pace in the fourth quarter after a 1.8 percent gain in the prior three months, the Commerce Department reported Feb. 29. The growth rate excluding a jump in inventories was 1.1 percent. Stockpiles were rebuilt at a $54.3 billion annual pace, adding 1.9 percentage points to growth.

Stockpile Surge

The surge in stockpiles last quarter followed a reduction in the July through September period amid mounting concern that Europe’s debt crisis and the U.S. credit-rating downgrade would restrain demand at a time the U.S. labor market was struggling to pick up.

Employers in the U.S. boosted payrolls more than forecast in February, the Labor Department said today, indicating companies are growing more optimistic about the expansion. The jobless rate held at 8.3 percent.

Auto dealers may be among retailers benefiting from the improvement in employment, prompting a rampup in stockpiles. Sales of cars and light trucks rose 6.4 percent in February from the prior month to reach a 15 million annual pace, the highest reading since February 2008, according to figures from Ward’s Automotive Group.

General Motors Co. (GM), which is halting production of its Volt plug-in hybrid for five weeks, plans to pace production of the vehicle according to inventory levels that got too high, Chief Executive Officer Dan Akerson said this week.

“We are going to match production to inventory,” he said March 7 in San Francisco. “We saw inventory building and we wanted to get it into line.”

Wholesalers make up about 30 percent of all business stockpiles. Factory inventories, which comprise about 38 percent of the total, rose 0.6 percent in January, Commerce Department data showed on March 5. Retail stockpiles, which make up the rest, will be included in the business inventories report due on March 13.

To contact the reporter on this story: Bob Willis in Washington at bwillis@bloomberg.net

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


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