Wholesale Inventories, Sales in U.S. Rose in March
May 11, 2010, 10:14 AM EDT
By Courtney Schlisserman
May 11 (Bloomberg) -- Inventories at U.S. wholesalers rose for a third month in March, and sales climbed even more, a signal companies will need to step up orders to try to meet demand.
The 0.4 percent gain in the value of stockpiles followed a 0.6 percent increase the prior month, the Commerce Department said today in Washington. Sales gained 2.4 percent, the most since November.
The amount of goods on hand compared to sales dropped to the lowest level on record, indicating factories will need to keep increasing production. A report later this week is projected to show purchases at retailers climbed again in April, pointing to a rebound in consumer spending.
“Inventories across the board have been lean for some time,” said Joseph Brusuelas, president of Brusuelas Analytics in Stamford, Connecticut. “Firms are cautiously moving forward as consumers increase outlays.”
U.S. stocks fell for the fifth time in six days on concern growing government debt will hamper European growth. The Standard & Poor’s 500 Index fell 0.6 percent to 1,152.74 at 10:10 a.m. in New York.
Record Low
At the current sales pace, wholesalers had enough goods on hand to last 1.13 months, down from 1.16 in February and the least since comparable records began in 1992.
The value of goods sold increased to $348 billion, the most since October 2008.
Wholesalers make up about 30 percent of all business stockpiles. Factory inventories, which make up slightly more of the total, climbed 0.3 percent, the government reported May 4. Retail stockpiles, which make up the rest, will be included in the May 14 business inventories report.
Stockpile replenishment added 1.6 percentage points to gross domestic product in the first quarter, according to Commerce Department estimates released April 30, and probably will continue to be a boon to growth in coming months as companies step up spending and production to restock shelves.
One reason companies are increasing stockpiles is because American households are spending more. Consumer purchases rose in March by the most in five months, according to Commerce Department data released May 3.
Replenish Stockpiles
The need to rebuild depleted inventories is one reason manufacturing is picking up. The Institute for Supply Management said last week that its factory index rose to 60.4 in April, the highest level in almost six years. Fifty is the dividing line between expansion and contraction.
Today’s report showed wholesalers’ stockpiles of durable goods, or those meant to last several years, increased 0.8 percent in March, the biggest advance since August 2008. Metals, electrical and professional equipment led the gains.
Some areas couldn’t keep up with the jump in demand. Sales at furniture wholesalers increased 2.8 percent, pushing inventories down 0.6 percent. The inventory-to-sales ration decreased to 1.31 months, the lowest level since June 2002.
Caterpillar Inc., the world’s largest maker of construction equipment, last month raised its sales and profit projections for the year. The company said April 26 that after cuts in 2009, dealers held new machine inventories about flat with the end of last year and reduced engine inventories about $200 million.
Inventories of nondurable goods fell 0.2 percent as sales increased 2.8 percent.
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