Tags: US | Economy

Rising Wholesale Inventories, Sales Hint of Stable Recovery

Wednesday, 09 Jun 2010 10:05 AM

Inventories held by wholesalers rose for a fourth straight month in April while sales rose for a 13th consecutive time. Both gains were encouraging signs that point to a sustained economic recovery.

Wholesale inventories increased 0.4 percent last month after a 0.7 percent gain in March, the Commerce Department said Wednesday.

Sales increased 0.7 percent in April, helped by higher demand for autos, lumber, computers and electrical equipment. The rise followed a 2.4 percent surge in March.

The hope is that a sustained rise in demand will prompt businesses to step up orders and restock depleted shelves. That would give a boost to factories and prompt them to increase hiring.

Since sales rose at a faster clip than inventories were rebuilt, the ratio of inventories to sales fell to 1.13, the lowest point on records that go back to 1992. At that rate, it would take only 1.13 months to clean out the remaining inventories at the April sales pace.

That is also viewed as a good sign for the recovery. It means businesses will keep having to restock depleted shelves. That leads to rising factory production and further support for the economic recovery. A year ago, the inventory to sales ratio stood at 1.36.

Inventories at the wholesale level had fallen for 13 consecutive months through September of last year. Businesses went through a massive liquidation of their stocks in a struggle to contain costs during the recession.

The move away from slashing inventories to restocking has played an important role in supporting growth in the past two quarters. A rise in factory orders has made the manufacturing sector one of the strongest contributors to the economic recovery.

The overall economy, as measured by the gross domestic product, grew at an annual rate of 5.6 percent in the final three months of last year, a surge powered by a swing in inventories. Growth slowed to 3 percent in the first three months of this year with continued strength from inventories.

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Inventories held by wholesalers rose for a fourth straight month in April while sales rose for a 13th consecutive time. Both gains were encouraging signs that point to a sustained economic recovery. Wholesale inventories increased 0.4 percent last month after a 0.7 percent...
US,Economy
331
2010-05-09
 

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