Wholesale Inventories Increase 1% as Sales Decline

Friday, 08 Apr 2011 10:41 AM

 

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Inventories at U.S. wholesalers climbed in February as sales decreased for the first time since the recession ended.

Stockpiles increased 1 percent, the same as in January and matching the median projection in a Bloomberg News survey of economists, Commerce Department data showed today in Washington. Sales dropped 0.8 percent, the first fall since June 2009.

At the current pace of sales, wholesalers had enough goods on hand to last 1.16 months compared with a high of 1.43 months in January 2009 in the midst of the economic slump. The need to rebuild inventories is among reasons economists project manufacturing will continue to bolster the expansion.

“Inventories are lean, though not grossly lean,” Mike Montgomery, an economist at IHS Global Insight in Lexington, Massachusetts, said before the report. “There is growth in demand for goods, albeit not overwhelmingly robust. Manufacturing will play a strong supporting role for the expansion.”

The median forecast for wholesale inventories was based on a Bloomberg survey of 32 economists. Estimates ranged from increases of 0.5 percent to 1.5 percent. The January figure was revised from a previously reported 1.1 percent gain.

Wholesalers make up about 30 percent of all business stockpiles. Factory inventories, which comprise about 38 percent of the total, rose 0.8 percent in February after a 1.5 percent gain the previous month, the Commerce Department said on March 31. Retail stockpiles, which make up the rest, will be included in the April 13 business inventories data.

Metals, Autos

Today’s report showed wholesalers’ stockpiles of durable goods, or those meant to last several years, increased 0.6 percent in February, boosted by metals and automobiles.

The value of unsold non-durable goods rose 1.5 percent and sales fell 0.4 percent.

Oxford Industries Inc., an Atlanta-based manufacturer and wholesale marketer of branded and private-label clothing for men, is adding goods following a pickup in sales.

“I’m very happy to have a little extra inventory right now to continue to fuel our business,” Terry Pillow, chief executive officer of the company’s Tommy Bahama division, said on a March 29 conference call. “We’ve been in somewhat of a chase mode in the first eight weeks, trying to catch up” to demand.

The strengthening labor market signals further gains in consumer spending that will prompt businesses to replenish stockpiles. Employers added 216,000 workers to payrolls in March and the jobless rate dropped to a two-year low of 8.8 percent, Labor Department figures showed on April 1.

Inventory Slowdown

Inventories in the fourth quarter were stocked at a $16.2 billion pace, compared with a previously reported $7.1 billion rate and down from a $121.4 billion rate in the third quarter, government data showed last month. The economy grew at a 3.1 percent pace in the final three months of 2010.

While leaner stockpiles help set the stage for faster growth, they can also be a constraint when supply chains are disrupted by natural disasters like the earthquake and tsunami in Japan. General Motors Co. reported interruptions in output in the week of March 21 at its factory in Shreveport, Louisiana, because of parts shortages.

© Copyright 2014 Bloomberg News. All rights reserved.

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