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

Wholesale Inventories, Sales in U.S. Rose in March (Update1)

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By Courtney Schlisserman

May 11 (Bloomberg) -- Inventories at U.S. wholesalers rosefor a third month in March, and sales climbed even more, a signalcompanies will need to step up orders to try to meet demand.

The 0.4 percent gain in the value of stockpiles followed a0.6 percent increase the prior month, the Commerce Departmentsaid today in Washington. Sales gained 2.4 percent, the mostsince November.

The amount of goods on hand compared to sales dropped to thelowest level on record, indicating factories will need to keepincreasing production. A report later this week is projected toshow purchases at retailers climbed again in April, pointing to arebound in consumer spending.

“Inventories across the board have been lean for sometime,” said Joseph Brusuelas, president of Brusuelas Analyticsin Stamford, Connecticut. “Firms are cautiously moving forwardas consumers increase outlays.”

U.S. stocks fell for the fifth time in six days on concerngrowing 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. inNew York.

Economists forecast wholesale inventories would rise 0.5percent, according to the median of 36 projections in a BloombergNews survey. Estimates ranged from gains of 0.1 percent to1 percent.

Record Low

At the current sales pace, wholesalers had enough goods onhand to last 1.13 months, down from 1.16 in February and theleast since comparable records began in 1992.

The value of goods sold increased to $348 billion, the mostsince October 2008.

Wholesalers make up about 30 percent of all businessstockpiles. Factory inventories, which make up slightly more ofthe total, climbed 0.3 percent, the government reported May 4.Retail stockpiles, which make up the rest, will be included inthe May 14 business inventories report.

Stockpile replenishment added 1.6 percentage points to grossdomestic product in the first quarter, according to CommerceDepartment estimates released April 30, and probably willcontinue to be a boon to growth in coming months as companiesstep up spending and production to restock shelves.

One reason companies are increasing stockpiles is becauseAmerican households are spending more. Consumer purchases rose inMarch by the most in five months, according to CommerceDepartment data released May 3.

Replenish Stockpiles

The need to rebuild depleted inventories is one reasonmanufacturing is picking up. The Institute for Supply Managementsaid last week that its factory index rose to 60.4 in April, thehighest level in almost six years. Fifty is the dividing linebetween expansion and contraction.

Today’s report showed wholesalers’ stockpiles of durablegoods, or those meant to last several years, increased 0.8percent 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. Salesat furniture wholesalers increased 2.8 percent, pushinginventories down 0.6 percent. The inventory-to-sales rationdecreased to 1.31 months, the lowest level since June 2002.

Caterpillar Inc., the world’s largest maker of constructionequipment, last month raised its sales and profit projections forthe year. The company said April 26 that after cuts in 2009,dealers held new machine inventories about flat with the end oflast year and reduced engine inventories about $200 million.

Inventories of nondurable goods fell 0.2 percent as salesincreased 2.8 percent.

To contact the reporters on this story:Courtney Schlisserman in Washington [e-mail]

Last Updated: May 11, 2010 10:12 EDT