Wholesale Inventories in U.S. Rose More Than Forecast

Inventories at U.S. wholesalers rose in July by the most in two years as a rebound in demand prompted companies to add to stockpiles.

The 1.3 percent increase in the value of inventories was three times the median estimate in a Bloomberg News survey and followed a 0.3 percent gain the prior month, Commerce Department figures showed today in Washington. Sales at distributors climbed 0.6 percent, the most since April, after falling 0.5 percent.

The amount of goods on hand compared with sales suggests manufacturing gains will be sustained in coming months. Inventory rebuilding, after helping the economy recover from the worst recession since the 1930s, may cool unless consumers pick up the pace of spending.

“Companies showed a willingness to extend themselves a bit more, and that’s a positive,” said Richard DeKaser, chief economist at Woodley Park Research in Washington, whose 0.8 percent forecast was the highest in the Bloomberg survey. “At the same time, inventories are still lean.”

Economists forecast inventories would increase 0.4 percent, following a previously reported 0.1 percent gain in June, according to the median of 32 projections in a Bloomberg survey. Estimates ranged from increases of 0.1 percent to 0.8 percent. The July gain was the biggest since July 2008.

Stocks maintained gains after the report, with the Standard & Poor’s 500 Index rising 0.3 percent to 1,107.41 at 10:10 a.m. in New York.

Factory Inventories

Wholesalers make up about 30 percent of all business stockpiles. Factory inventories, which comprise more of the total, advanced 1 percent in July, the Commerce Department said last week. Retail stockpiles, which make up the rest, will be included in the Sept. 14 business inventories report.

Today’s report showed wholesalers’ stockpiles of durable goods, or those meant to last several years, increased 1 percent in July, led by gains in autos, furniture, machinery and metals.

The value of unsold non-durable goods rose 1.7 percent and sales increased 0.6 percent. Sales and inventories of petroleum products advanced in July from the previous month. Apparel inventories climbed 4.1 percent, the most since November 2004.

At the current sales pace, wholesalers had enough goods on hand to last 1.16 months in July, compared with 1.15 months in June. The inventory-to-sales ratio, which reached a record low of 1.13 months in April, is the highest since February.

The Commerce Department’s latest figures on gross domestic product showed the economy is getting less of a boost from inventories. Stockpiles added 0.63 percentage point to growth in the second quarter, compared with 2.64 percentage points in the prior three months and 2.83 percentage points in the fourth quarter.

Consumer Demand

Some manufacturers are downgrading their forecasts. Intel Corp., the world’s biggest chipmaker, last month cut its third- quarter revenue projection, citing weaker-than-expected consumer demand for personal computers in mature markets as the reason for the adjustment.

August data suggest companies are still adding to inventories. The Institute for Supply Management said last week that its factory inventory gauge rose to 51.4. Readings above 50 signal expansion.

Public opinion polls show jobs and the economy are top concerns among voters two months before November congressional elections in which the Democrats are at risk of losing their majorities in the House of Representatives and the Senate.

President Barack Obama’s approval ratings have slipped and support for the Republican Party has grown amid signs the economy was cooling.

To contact the reporter responsible for this story: Timothy R. Homan in Washington at thoman1@bloomberg.net

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