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Wholesale Inventories Rose Less Than Forecast in June

Wednesday, 10 Aug 2011 10:30 AM

Inventories at U.S. wholesalers climbed in June at the slowest pace in seven months as distributors kept stockpiles in line with sales.

The 0.6 percent increase in inventories followed a revised 1.7 percent rise in May, Commerce Department figures showed today in Washington. Economists projected a 1 percent gain, according to the median forecast in a Bloomberg News survey. Sales also rose 0.6 percent in June after dropping the previous month.

Wholesalers may be trying to limit the amount of unsold merchandise on hand after the U.S. economic expansion slowed in the first half of this year. To help bolster the economy, Federal Reserve policy makers yesterday pledged to keep their benchmark interest rate at a record low at least through mid-2013.

“Inventories are likely desired at a much lower level so they’re probably excessive given new expected future economic growth,” Robert Brusca, president of Fact & Opinion Economics in New York, said before the report. “That’s one of the reason we’re seeing the manufacturing industry wind down.”

The median projection for wholesale inventories was based on a survey of 34 economists whose estimates ranged from increases of 0.3 percent to 1.5 percent. The May reading was revised from a previously reported 1.8 percent increase.

Wholesalers’ stockpiles of durable goods, or those meant to last several years, increased 1.3 percent in June, led by a surge in imported automobiles and parts, today’s report showed. Metals and machinery inventories also picked up in June.

The value of unsold non-durable goods inventories decreased 0.4 percent as the value of farm products and petroleum stockpiles fell.

Inventory-Sales Ratio

At the current sales pace, wholesalers had enough goods on hand to last 1.16 months in June, the same as a month earlier and compared with a record low of 1.13 months reached in March.

After helping drive the early stages of the economic recovery, inventory rebuilding slowed in the second quarter of 2011. Stockpiles contributed 0.2 percentage point to gross domestic product from April to June, according to Commerce Department data.

The U.S. economy expanded at a 1.3 percent annual rate during that quarter, raising concerns of a prolonged slowdown. Fed Chairman Ben S. Bernanke and his fellow policy makers said in June that they expected growth to pick up as supply chain disruptions related to Japan’s earthquake eased and commodity costs moderated. Yesterday, they offered a dimmer view.

“Economic growth so far this year has been considerably slower than the committee had expected,” it said. The Fed also said it expects a “somewhat slower pace of recovery over coming quarters,” adding that “downside risks to the economic outlook have increased.”

Consumer Spending

Consumers may spend less as the economy cools, reducing the need for companies to step up additions to inventories. Household spending rose at 0.1 percent pace in the second quarter, the weakest since the April-June period of 2009.

“The consumer’s level of confidence is pretty fragile,” Don Johnson, General Motor Co.’s vice president of U.S. sales, said on an Aug. 2 conference call. “We do clearly understand the need to actively manage our inventories and if need be we will use production schedule changes as our main tool to manage inventory, and we’ll remain competitive with our incentives.”

Johnson said the economy has lost some momentum and will recover more gradually than Detroit-based GM had anticipated.

Wholesalers make up about 30 percent of all business stockpiles. Factory inventories, which comprise about 38 percent of the total, grew 0.2 percent in June, the Commerce Department said Aug 3. Retail stockpiles, which make up the rest, will be included in the Aug. 12 business inventories report.

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Inventories at U.S. wholesalers climbed in June at the slowest pace in seven months as distributors kept stockpiles in line with sales.The 0.6 percent increase in inventories followed a revised 1.7 percent rise in May, Commerce Department figures showed today in Washington....
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2011-30-10
 

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