WASHINGTON U.S. wholesale businesses increased their stockpiles at a faster rate in April, responding to a strong gain in sales. The increase could be a good sign for economic growth in the April-June quarter.
The Commerce Department says stockpiles grew 0.6 percent at the wholesale level in April, double the March gain. Sales by wholesale businesses jumped 1.1 percent in April, nearly three times the March sales gain.
Stockpiles at the wholesale level stood at $483.5 billion in April. Thats 25.6 percent above the post-recession low of $384.9 billion in September 2009.
It would take roughly five weeks to exhaust all wholesale stockpiles at the April sales pace. Thats considered a healthy time frame and suggests businesses will keep restocking to meet demand.
When businesses step up restocking, they order more goods. That generally leads to increased factory production and higher economic growth.
Slower growth in inventories held back growth in the January-March quarter. In the first three months of this year, the economy grew at an annual rate of 1.9 percent.
The increase in wholesale inventories was bigger than economists had forecast. That could signal that inventory growth will pick up and boost economic growth in the April-June quarter.
But stockpile growth largely depends on the spending habits of U.S. consumers and businesses.
Weaker job creation in April and May could force some to scale back spending. And pay has risen just 1.7 percent over the past 12 months. Thats slower than the rate of inflation for that period.
Sluggish job growth and weak pay raises threaten to drag on consumer spending, which would weaken growth. Consumer spending accounts for 70 percent of economic activity.
One positive change: Gas prices have tumbled since early April. That could give Americans more money to spend on appliances, vacations and other discretionary purchases.
Many businesses cut back on restocking last summer fearing that the economy was on the verge of another recession. When it became clear that it wasnt, they raced to rebuild stockpiles and keep pace with consumer demand.
Stockpiles at the wholesale level account for about 27 percent of total business inventories. Stockpiles held by retailers make up about one-third of the total. Manufacturing inventories represent about 40 percent of the total.
U.S. Wholesale Inventories Rise More Than Expected In April - RTT News
6/8/2012 10:18 AM ET
(RTTNews) - U.S. wholesale inventories increased by more than expected in April even as wholesale sales increased, according to figures released Friday by the Commerce Department.
Total inventories of merchant wholesalers were recorded at a seasonally adjusted level of $483.5 billion at the end of April, a 0.6 percent increase from revised March levels, which were also up slightly from initial reports.
Economists had expected wholesale inventories to increase by about 0.5 percent.
On a year-over-year basis, U.S. wholesale inventories were up 8.2 percent from April 2011 levels.
April also saw an increase in sales at the wholesale level, with the Commerce Department figures showing a 1.1 percent increase to a seasonally adjusted level of $415 billion, up 6.8 percent from April 2011 levels.
Despite the larger increase in sales than in inventories, the inventories-to-sales ratio held steady at 1.17 in April.
The increase in wholesale inventories was driven by a 1.1 percent increase in inventories durable goods, which more than offset a 0.1 percent decline in inventories of non-durable goods. The April increase in durable goods inventories is the strongest since May 2011.
Automotive wholesalers recorded a 1.7 percent increase in inventories, while professional equipment inventories rose 1.4 percent, paper inventories jumped 3.9 percent, machinery inventories climbed 2.4 percent and petroleum inventories advanced 2 percent.
Inventories of groceries, drugs and furniture posted declines in April.
On the sales side, sales of wholesale durable goods were up 0.1 percent, while sales of non-durable goods rose 1.9 percent.
Automotive sales recorded a 3.8 percent increase, while wholesale petroleum sales jumped 4.8 percent, the largest increase since April 2011.
Wholesale sales of furniture, metals, machinery, paper goods and groceries all fell notably for the month.
by RTT Staff Writer
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