Bloomberg News

Business Inventories in U.S. Rose More Than Forecast in January

March 13, 2012

Businesses in the U.S. increased inventories in January at a faster pace than projected, led by the biggest jump in automobile stockpiles in more than a year.

The 0.7 percent rise followed a revised 0.6 percent advance the prior month that was larger than previously reported, Commerce Department data showed today in Washington. The median projection in a Bloomberg News survey called for a 0.5 percent gain. Sales climbed 0.4 percent.

Inventory swings may diminish in the first half of 2012 after helping the economy grow in the fourth quarter at the fastest pace in more than a year. Another report today showed retail purchases in February rose at the fastest pace in five months, led by auto dealers and clothing stores, indicating companies may have been preparing for improving sales.

“A lot of it is driven by the auto industry, whose production is ramping higher to meet a pickup in demand,” Sal Guatieri, a senior U.S. economist at BMO Capital Markets in Toronto, said before the report. “Inventories are no longer at the lean levels they were coming out of the recession.”

The median forecast for business inventories was based on a Bloomberg survey of economists. The December figure was revised from a 0.4 percent gain originally reported.

Retail sales rose 1.1 percent last month, matching the median forecast of 81 economists surveyed by Bloomberg and following a 0.6 percent increase in January that was larger than previously estimated, another report from the Commerce Department showed today. The improvement in demand was broad-based as 11 of 13 industry categories showed gains, including auto dealers and clothing stores.

Retail Stockpiles

Retailers’ inventories, the only part of today’s report on stockpiles not previously released, increased 1.1 percent, the biggest gain since June 2010, while sales rose 0.5 percent.

At the current sales pace, businesses had enough goods on hand to last 1.27 months, the same as in December. The last time the ratio was lower was in March 2011.

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.

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.

More Hiring

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

Stockpiles at auto and parts dealers jumped 2.6 percent in January, the most since July 2010, today’s report showed.

Auto dealers may be among retailers benefiting from the improvement in employment, prompting the ramp-up 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.

New Britain, Connecticut-based Stanley Black & Decker Inc. (SWK), a global provider of power tools, is among companies that have become more proactive in managing inventory.

“Your vendors, your manufacturing locations and your customers and the forecasts that go back and forth between those different entities are in sync and quickly respond to changes in the environment,” Chief Financial Officer Donald Allan told an industry conference last week. “And as a result, you don’t have large inventory levels or too little of inventory because they are very automated and they are in sync.”

Factory inventories, which comprise about 40 percent of the total, rose 0.6 percent in January, Commerce Department data showed on March 5. Wholesale inventories, which make up about 30 percent of all stockpiles, rose 0.4 percent, Commerce Department data showed on March 9.

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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