Tags: Business | Inventories | Sales | stockpiles

Business Inventories Climb as Sales Drop for Second Month

Monday, 16 Jul 2012 10:25 AM

U.S. companies added to their stockpiles in May, but their sales fell for a second straight month.

Business stockpiles grew 0.3 percent in May from April, matching April's increase, the Commerce Department reported Monday. Total business sales fell 0.1 percent in May, matching the April decline.

Total stockpiles rose to $1.58 trillion in May. That's nearly 20 percent higher than the low point in September 2009, shortly after the recession ended.

When businesses step up restocking, they order more goods. That generally leads to increased factory production and higher economic growth.

But stockpile growth largely depends on the spending habits of U.S. consumers. Americans reduced their spending at retail businesses in June for the third straight month. Many consumers are feeling constrained by weak job creation and paltry wage increases.

It would take about five weeks to exhaust total stockpiles at the May sales pace. That's considered a healthy timeframe.

Still, many economists now believe economic growth has slowed from the January-March's lackluster 1.9 percent annual pace.

Paul Ashworth, chief U.S. economist at Capital Economics, said annual growth in the April-June quarter likely fell as low as 1.5 percent.

For May, stockpiles increased the most at the retail level, a gain of 0.8 percent. Stockpiles at the wholesale level rose 0.5 percent, while manufacturing inventories declined 0.2 percent.

Sales in May rose 0.5 percent at the manufacturing level. But they fell at both the wholesale and retail levels.

Wholesale stockpiles account for about 27 percent of total business inventories. Stockpiles held by retailers make up about one-third of the total and manufacturing inventories represent about 40 percent.

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2012-25-16
 

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