Bloomberg News

Business Inventories in U.S. Rise at Slower Pace as Sales Climb

May 15, 2012

Businesses in the U.S. rebuilt inventories in March at the slowest pace in four months as sales climbed, indicating orders to American factories will continue to increase.

The 0.3 percent advance in stockpiles followed a 0.6 percent gain the prior month, Commerce Department data showed today in Washington. The median projection in a Bloomberg News survey called for a 0.4 percent rise. Sales increased 0.6 percent.

Inventory swings will probably not play a big role in economic growth in coming quarters after stockpiles boosted the gain in fourth-quarter gross domestic product to the biggest in more than a year. Another report today showed retail sales cooled in April.

“What we’re seeing is more or less trying to keep pace with final demand,” Stephen Stanley, chief economist at Pierpont Securities LLC in Stamford, Connecticut, said before the report. “I don’t think that firms have built up inventories involuntarily.”

The median forecast for business inventories was based on a Bloomberg survey of 44 economists. Estimates ranged from a gain of 0.2 percent to 0.7 percent. February’s figure was unrevised from an originally reported 0.6 percent increase.

Another Commerce Department report today showed retail sales rose in April at the slowest pace of the year, showing unseasonably mild weather and pre-Easter shopping may have pulled consumers to stores the prior month. The 0.1 percent gain followed a 0.7 percent increase in March. The increase matched the median forecast in a Bloomberg survey.

The cost of living was little changed in April as fuel prices dropped, and manufacturing in the New York region expanded this month at a faster pace than projected, other reports also showed.

Prices Unchanged

Unchanged consumer prices matched the median forecast of economists surveyed by Bloomberg News and followed three straight gains that included a 0.3 percent rise in March, Labor Department data showed.

The Federal Reserve Bank of New York’s general economic index increased to 17.1 this month from 6.6 in April. The median estimate in a survey of Bloomberg economists called for an increase to 9. Readings greater than zero signal expansion in the so-called Empire State Index, which covers New York, northern New Jersey and southern Connecticut. The last negative

Retailers’ stockpiles, the only part of today’s inventory report not previously released, increased 0.4 percent in March while sales advanced 0.7 percent.

Businesses had enough goods on hand to last 1.27 months at the current sales pace, the lowest since December and down from 1.28 the prior month.

Growth Slowdown

The world’s largest economy expanded at a 2.2 percent annual rate in the first after a 3 percent pace in the prior three months, Commerce Department figures show.

Part of the slowdown reflected less support from inventories. Stockpiles were rebuilt at a $69.5 billion annual pace, adding 0.6 percentage points to growth in the first three months of 2012. That compares with a 1.8 point contribution in the prior period.

Wholesale inventories, which make up about 30 percent of all stockpiles, rose 0.3 percent in March, the slowest pace in four months, the Commerce Department reported May 9, following a 0.9 percent gain. Factory inventories, which comprise about 38 percent of total stockpiles, grew 0.3 percent in March, the government said May 2.

“A lot of our customers are managing their inventories much tighter now than what they have in the past,” Roy Armes, president and chief executive officer of Cooper Tire & Rubber Co. (CTB:US), said during a May 2 earnings call. “A lot of that has to do with the economy, some of it has to do with just managing cash and there’s a lot of it that has to do with the distribution network.”

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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