Businesses at the wholesale level added to their inventories in December at a healthy clip even though demand for their products slowed. The expectation is that rising demand from businesses will keep factories humming.
Wholesale businesses boosted inventories 1 percent in December, pushing the total to $430.5 billion, the Commerce Department reported Thursday. Economists consider that a healthy level for inventories. It is 11.4 percent above the low reached in September 2009 when companies were slashing their stockpiles in response to a deep recession.
Sales at the wholesale level rose 0.4 percent in December, a smaller than expected increase and the poorest showing since last July. However, the December advance followed a strong 1.9 percent rise in November.
Inventory restocking had been unchanged in November after 10 straight months of increases. Economists did not view that slowdown as troubling, arguing that sales were so strong in November that wholesalers probably had trouble keeping up with demand.
Most economists believe inventories will keep growing this year as businesses respond to rising demand.
Inventories climbed to a high of $455.6 billion in August 2008. That was not a sign of a healthy economy, but rather an unwanted buildup of stockpiles in the face of plunging demand.
Strong gains in both inventories and sales over the past year have been good news for many industries, which have been able to boost production and hire more workers. Manufacturing has been one of the standout performers since the recession ended in June 2009.
For December, wholesalers increased their inventories for autos, lumber and computers but stockpiles of clothing at the wholesale level declined.
Retailers enjoyed the best holiday shopping season in four years and auto sales have been rising in recent months.
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