Tags: US | Business | Inventories

Business Inventories Rise in May but Sales Decline

Wednesday, 14 Jul 2010 10:37 AM

Inventories held by businesses rose for a fifth consecutive month in May but sales dropped for the first time in more than a year.

Inventories edged up 0.1 percent in May, the Commerce Department reported Wednesday. Sales dropped 0.9 percent, the first decline since March 2009 when they fell 2.1 percent.

The drop in total business sales was further evidence that the recovery was slowing in the late spring. A separate report Wednesday said sales at the retail level dropped for a second straight month in June.

Businesses helped drive the early stages of the recovery last year by building up their stocks after slashing them during the recession.

The worry is that if consumer demand falters, businesses will cut back. That could mean fewer orders to U.S. factories and weaker output from manufacturers — one of the strongest industries in the recovery.

For May, inventories held by manufacturers were down 0.4 percent. But stocks held by wholesalers were up 0.5 percent and retail inventories rose 0.3 percent.

Sales in May at the manufacturing level fell 1.3 percent, 0.3 percent at the wholesale level, and 1.2 percent at the retail level.

The inventory to sales ratio edged up slightly to 1.24 in May from 1.23 April. That means it would take 1.24 months to exhaust inventories at the May sales pace.

That ratio had spiked above 1.45 months in early 2009. Businesses were caught with unwanted stocks during the recession. That prompted a massive liquidation of inventories through most of 2009 as businesses struggled to get costs under control.

Toward the end of the year, business began building up their inventories. That helped spur growth at an annual rate of 5.6 percent in the final three months of last year.

Growth slowed to a 2.7 percent growth rate in the first three months of this year, in part because the pace of inventory rebuilding slowed. Many economists believe growth will slow to around 2.5 percent in the second half of this year.

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Inventories held by businesses rose for a fifth consecutive month in May but sales dropped for the first time in more than a year.Inventories edged up 0.1 percent in May, the Commerce Department reported Wednesday. Sales dropped 0.9 percent, the first decline since March...
US,Business,Inventories
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2010-37-14
 

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