Tags: US | Wholesale | Inventories

Wholesale Inventories, Sales Post Strong Gains

Friday, 08 Jan 2010 10:46 AM

Inventories held by wholesalers posted an unexpectedly strong gain in November while sales shot up by the largest amount in 10 months, two signs that the economic recovery was gaining traction in the fall.

The Commerce Department said Friday that wholesale inventories rose 1.5 percent in November, a much stronger showing than the 0.2 percent drop that economists had expected. Sales jumped 3.3 percent, far better than the 0.9 percent rise that had been forecast.

It marked the eighth consecutive month that sales at the wholesale level have increased and was the largest gain since last January. Economists hope that sustained sales increases will encourage businesses to restock depleted shelves which will in turn mean higher orders to factories. That would provide support to plants struggling to emerge from a deep recession.

Commerce also reported, in another positive economic sign, that wholesale inventories increased by 0.6 percent in October, double the estimate the government made a month ago. That increase marked the first rise in inventories after a record stretch of 13 straight declines as businesses slashed the amount of inventories they were holding in an effort to trim costs.

The overall economy grew at an annual rate of 2.2 percent in the July-September quarter after a record four consecutive declines in the gross domestic product, the country's total output of goods and services.

An even stronger GDP performance is expected for the just-completed October-December quarter. Economists with IHS Global Insight believe the economy will expand at a sizzling annual rate of 5.1 percent in the fourth quarter with about 3 percentage points of that burst expected to reflect a swing from cutting inventories to restocking. The effort to rebuild inventories is expected to provide ongoing support for the economy in 2010.

However, there is a concern that this momentum could be derailed if consumer spending, which accounts for 70 percent of economic activity, falters in coming months because of continued high unemployment levles.

The Labor Department reported Friday that the nation's jobless rate remained at 10 percent in December as employers shed 85,000 jobs. Since the recession began in December 2007, the country has lost more than 8 million jobs.

The November rise in wholesale inventories pushed them to $386.26 billion, still 11 percent below where they stood in November 2008. The ratio of inventories to sales dipped to 1.14 from 1.17 in October. That means it would take 1.14 months to deplete inventories at the November sales pace.

Wholesale inventories are goods held by distributors who generally buy from manufacturers and sell to retailers. They make up about 25 percent of all business stockpiles. Factories hold another third of inventories and retailers hold the rest.

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Inventories held by wholesalers posted an unexpectedly strong gain in November while sales shot up by the largest amount in 10 months, two signs that the economic recovery was gaining traction in the fall.The Commerce Department said Friday that wholesale inventories rose...
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2010-46-08
Friday, 08 Jan 2010 10:46 AM
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