Tags: US | Economy

Wholesale Inventories, Sales Rise More Than Expected

Friday, 09 Apr 2010 10:13 AM

 


Inventories held by wholesalers rose by a larger-than-expected amount in February while sales increased for the 11th consecutive month.

The Commerce Department said Friday that inventories at the wholesale level were up 0.6 percent in February, better than the 0.4 percent increase analysts had expected. Sales rose 0.8 percent, surpassing the 0.5 percent rise economists had forecast.

The gains were an encouraging sign that stronger demand is prompting businesses to restock depleted shelves, a development that will help sustain the economic recovery.

The inventory increase followed a 0.1 percent rise in January, which was initially reported as a decline of 0.2 percent.

The rise in sales followed a 0.9 percent January advance and marked the 11th straight month that sales have been up.

Analysts are hoping that the string of sales increases will prompt businesses to begin restocking their depleted shelves on a sustained basis, giving a boost to the economy as it struggles to recover from the worst recession since the 1930s.

The back-to-back gains in inventories were the first since increases in both October and November.

However, inventories drop again in December. Before October, inventories had posted 13 straight declines as businesses went through a massive liquidation of their stocks during the recession, struggling to contain costs as demand for their products slumped.

The rise in inventories and sales in February left the inventory to sales ratio at 1.16, the same as in January. That is still at a historically low level and means that it would take only 1.16 months to deplete stockpiles at the February sales pace. The inventory to sales ratio was at 1.38 months a year ago.

The swing from massive inventory reductions contributed about two-thirds of the economy's overall growth in the October-December quarter, a period when the gross domestic product expanded at a 5.6 percent annual rate.

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