Inventories held by wholesalers rose for a fifth consecutive month in May but sales fell for the first time in more than a year, sending a mixed signal about the strength of the recovery.
Wholesale inventories increased 0.5 percent while sales dropped 0.3 percent, the Commerce Department said Friday. It was the first decline for sales since March of 2009.
The May sales decline is the latest sign that the economic recovery could be losing momentum as it enters the second half of this year. Weakness in sales could discourage businesses from boosting their orders. That would translate into a slowdown in factory production.
Economists had hoped that a steady rise in demand would prompt businesses to step up orders and restock depleted shelves. That would lift factories and prompt them to boost hiring to support increased production.
Manufacturing has been among the strongest industries coming out of the recession, but there have been signs recently that the recovery could be faltering.
Both consumer spending and business hiring have slowed, and the housing market has struggled since government incentives for homebuyers ended in April.
The concern is that the recovery, which was already slower than the average upturn after a steep recession, could slow even more, making it harder to make inroads in the nation's high unemployment levels.
The jobless rate fell to 9.5 percent in June from 9.7 percent in May. But the change was largely the result of people giving up their work searches.
Economic growth was just 2.7 percent in the first three months of this year. Many economists believe growth will slow to around 2 percent in the second half of this year.
The May increase in wholesale inventories was the largest rise since a 0.7 percent increase in March.
But even with the gain, wholesale inventories are 2.1 percent below where they were a year ago.
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 deepest recession in decades.
The 0.3 percent drop in sales in May followed a gain of 0.9 percent in April.
The combination of declining sales and rising inventories pushed the ratio of inventories to sales up slightly to 1.14 in May from a record low of 1.13 in April. That means it would take 1.14 months to deplete stocks at the May sales pace.
Over the past decade, a typical level for the inventory to sales ratio has been between 1.15 months to 1.2 months.
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