Wholesale Inventories, Sales in U.S. Rose in February

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By Bob Willis

April 9 (Bloomberg) -- Inventories at U.S. wholesalers rose in February, a sign companies are ramping up orders as sales climbed to the highest level in more than a year.

The 0.6 percent gain in the value of stockpiles was larger than anticipated and followed a revised 0.1 percent increase the prior month, the Commerce Department said today in Washington. Sales advanced 0.8 percent, the 11th consecutive increase.

A record reduction in stockpiles last year sets the stage for companies to boost investment and production in coming months as demand picks up. Efforts to stabilize inventories in the last three months of 2009 accounted for two-thirds of that quarter’s 5.6 percent pace of economic growth.

“Firms are seeing more reason for optimism in the outlook and are looking to build inventories to fill future sales growth,” said Zach Pandl, an economist at Nomura Securities International Inc. in New York who correctly forecast the inventory increase.

Inventories at wholesalers were forecast to rise 0.4 percent after a previously estimated drop of 0.1 percent for January, according to the median estimate of 35 economists surveyed by Bloomberg News. Estimates ranged from a decline of 0.2 percent to a gain of 0.6 percent.

The bigger-than-projected gain in February and the January revision indicate efforts to stabilize stockpiles again added to economic growth last quarter. Inventories contributed 3.8 percentage points to gross domestic product from October through December, the most in 22 years.

Stocks Rise

Stocks climbed on mounting signs the economic expansion that began in the middle of 2009 will be sustained. The Standard & Poor’s 500 Index rose 0.3 percent to 1,189.36 at 11:12 a.m. in New York. Treasury securities fell, pushing the yield on the benchmark 10-year note up to 3.91 percent from 3.89 percent late yesterday.

At the current sales pace, wholesalers had enough goods on hand to last 1.16 months, the same as in January. The measure reached a record low of 1.14 months in June 2008.

The value of goods sold climbed to $338.7 billion, the most since October 2008.

Wholesalers make up about 30 percent of all business stockpiles. Factory inventories, which make up about 38 percent of the total, climbed 0.5 percent in February, the Commerce Department reported on March 31. Retail stockpiles, which make up the rest, will be included in the April 14 business inventories report.

Boosting Production

Recent reports suggest the replenishment of depleted stockpiles will lift production in coming months. The Institute for Supply Management’s manufacturing gauge was 59.6 in March, the eighth consecutive month of growth.

Today’s figures showed wholesalers’ stockpiles of durable goods, or those meant to last several years, increased 0.5 percent in February, paced by gains in metals and electrical equipment.

Vehicle inventories rose 0.2 percent in February as sales climbed 2.4 percent, today’s report showed.

Inventories of nondurable goods showed a 0.8 percent gain, reflecting increased stockpiling of petroleum, groceries and clothing. Sales of non-durable goods rose 1.4 percent.