U.S. Wholesale Inventories Rose 1.9% in October
U.S. Wholesale Inventories Rose 1.9% in October
Mark Hirsch/Bloomberg
Inventories at U.S. wholesalers rose more than twice as much as forecast in October as companies stocked up to meet the biggest sales gain in seven months.
Inventories at U.S. wholesalers rose more than twice as much as forecast in October as companies stocked up to meet the biggest sales gain in seven months. Photographer: Mark Hirsch/Bloomberg
Inventories at U.S. wholesalers rose more than twice as much as forecast in October as companies stocked up to meet the biggest sales gain in seven months.
The 1.9 percent increase in inventories followed a revised 2.1 percent rise in September that was higher than initially estimated, Commerce Department figures showed today in Washington. The median of economists surveyed by Bloomberg News projected a 0.8 percent gain. Sales jumped 2.2 percent in October, partly reflecting the biggest gain in the value of farm products since November 2009.
The amount of goods on hand compared with sales in October held at the highest in almost a year, indicating companies may be growing confident about the outlook for demand to spur production. Recent data showed November retail same-store sales rose more than forecast, signs of momentum in the economy before the end of the year.
“The inventory cycle is maintaining its solid momentum,” said Joshua Shapiro, chief U.S. economist at MFR Inc. in New York. “With final demand showing more signs of life, it will build on itself. It means better output but also maybe more imports.”
Another report today showed the labor market is improving. Initial claims for unemployment insurance dropped to 421,000 last week from 438,000, the Labor Department said. The four-week moving average, a less-volatile measure, declined to the lowest level in more than two years.
Stocks Higher
Stocks gained for a third day and Treasury securities rose after the reports. The Standard & Poor’s 500 Index increased 0.2 percent to 1,230.97 at 10:38 a.m. in New York. The yield on the benchmark 10-year note fell to 3.22 percent from 3.27 percent late yesterday.
The median forecast for wholesale inventories was based on a survey of 35 economists. Estimates ranged from increases of 0.3 percent to 1.4 percent. The September gain was revised from a previously reported 1.5 percent increase.
Wholesalers make up about 30 percent of all business stockpiles. Factory inventories, which comprise about 38 percent of the total, rose 0.9 percent in October, the Commerce Department said Dec. 3. Retail stockpiles, which make up the rest, will be included in the Dec. 14 business inventories report.
Today’s report showed wholesalers’ stockpiles of durable goods, or those meant to last several years, increased 0.9 percent in October, led by furniture, computer equipment, electrical goods and machinery.
Farm Products
The value of unsold non-durable goods rose 3.2 percent and sales increased 3.7 percent. Sales of farm products jumped 26 percent in October. Inventories of farm goods rose 21 percent. The increases may have reflected higher prices of commodities.
At the current sales pace, wholesalers had enough goods on hand to last 1.18 months in October, matching September as the highest since November 2009. The inventory-to-sales ratio has increased since reaching a record low of 1.13 months in April.
The gain in wholesale inventories signals that imports in October probably also increased. The Commerce Department tomorrow will release trade balance figures. The median forecast of economists surveyed by Bloomberg is for a $43.9 billion shortfall, little changed from a month earlier.
Inventory rebuilding, a major driver of the early stages of the economic recovery, contributed 1.3 percentage points to the 2.5 percent expansion in the third quarter, according to the Commerce Department’s Nov. 23 figures.
Holiday Sales
Some retailers added more goods to stockpiles in anticipation spending would be sustained into the holidays. November comparable-store sales rose 5.3 percent at U.S. retailers, compared with a 3.5 percent estimate, Retail Metrics Inc. president Ken Perkins said in an interview.
“Our inventories tend to peak around now, too, with all the season stuff, particularly bigger-ticket electronics items coming in for Christmas,” Richard Galanti, chief financial officer at Costco Wholesale Corp., said on a conference call yesterday to discuss the company’s first-quarter earnings. “Average inventory per warehouse was up only 1 percent this year. Inventories are darn near flat on pretty good sales this past quarter.”
The Issaquah, Washington-based company’s profit climbed to $312 million, or 71 cents a share, in the quarter ended Nov. 21, from $266 million, or 60 cents a year earlier.
Big Lots Inc., a Columbus, Ohio-based closeout retailer, plans to end the fourth quarter with inventory levels slightly higher, yet enough to avoid losing potential holiday sales, according to Chief Executive Officer Steven Fishman.
To contact the reporter on this story: Shobhana Chandra in Washington at schandra1@bloomberg.net
To contact the editor responsible for this story: Christopher Wellisz at cwellisz@bloomberg.net
Rate this Page