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Wholesale Inventories in U.S. Increased 0.4%, Sales Climbed 1%

Inventories at U.S. wholesalers rose less than forecast in August as distributors kept stockpiles in line with sales.

The 0.4 percent increase in stockpiles followed a 0.8 percent rise in July, Commerce Department data showed today in Washington. The median projection in a Bloomberg News survey was for a 0.6 percent gain. Sales rose 1 percent, the most in five months.

Wholesalers kept enough goods on hand to last 1.16 months at the current pace of sales in August, matching the level of the previous three months. Restrained consumer spending and slower overseas demand may encourage companies to keep stockpiles lean, limiting bigger gains in manufacturing, a pillar of the recovery.

“Manufacturers are keeping a very tight rein on inventory levels,” Steven Wood, president of Insight Economics LLC in Danville, California, said before the report. “The manufacturing sector is growing only modestly.”

The median forecast for wholesale inventories was based on a Bloomberg survey of 31 economists. Estimates ranged from increases of 0.2 percent to 1 percent.

Employers added more jobs than forecast in September, another report today showed. Payrolls climbed by 103,000 after a revised 57,000 gain the prior month that was more than initially estimated, the Labor Department said.

Wholesalers’ stockpiles of durable goods, or those meant to last several years, increased 1.1 percent in August, boosted by a 4.5 percent jump in imports of automobiles that reflected the easing of supply chain constraints linked to Japan’s earthquake earlier this year, today’s report showed.

The value of unsold non-durable goods fell 0.6 percent and sales dropped 0.1 percent.

Propelled Manufacturing

Inventory rebuilding, which in the early stages of the recovery helped propel manufacturing to the forefront, may play a smaller role as sales growth slows.

The economy expanded at a 1.3 percent annual rate in the second quarter after a 0.4 percent pace in the first three months of this year, the weakest six-month period of the recovery that began in June 2009. Stockpiles subtracted 0.28 percentage point from gross domestic product, while in the prior quarter they added 0.32 point, Commerce Department figures showed on Sept. 29.

Kennametal Inc. (KMT), a Latrobe, Pennsylvania-based producer of metal-cutting tools, is among companies seeing leaner stockpiles at its distributors.

“Every time we have a recession, if you go back and study, companies become more efficient,” Chief Executive Officer Carlos Cardoso said on a conference call on Sept. 28. “They learn how to operate at a higher level with less inventory, and that’s true for this recession as well. So we find ourselves in a way that our customers have very little inventory.”

Wholesalers make up about 30 percent of all business stockpiles. Factory inventories, which comprise about 38 percent of the total, rose 0.4 percent in August, Commerce Department data showed on Oct. 4. Retail stockpiles, which make up the rest, will be included in the business inventories report due on Oct. 14.

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

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