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U.S. Business Inventories Rose 0.8% in October

Inventories in the U.S. rose in October by the most in five months as companies moved to bring stockpiles in line with demand.

The 0.8 percent gain followed little change in stockpiles a month earlier, the Commerce Department said today in Washington. The October increase matched the median projection in a Bloomberg News survey. Sales climbed 0.7 percent during the month.

Businesses kept enough goods on hand to last 1.27 months at the current sales pace in October, close to its lowest level of the year. Retail sales also rose in November as Americans bought more Apple Inc. (AAPL) iPhones and demand for cars improved, another report showed today.

“We think inventories will add modestly to growth in the fourth quarter after subtracting in the third,” Sal Guatieri, a senior economist at BMO Capital Markets in Toronto, said before the report. “The economic outlook appears to be improving, so there is reason for businesses to expand their inventories.”

Inventory estimates ranged from increases of 0.1 percent to 1.2 percent in the Bloomberg survey of 47 economists. September stockpiles were revised from a previously reported reading of no change.

Sales at retailers rose at a slower pace last month, another Commerce Department report showed today. The 0.2 percent gain in purchases was led by autos and electronics.

Retailers’ inventories in October, the only part of today’s report not previously released, were unchanged in October as sales increased 0.6 percent. Stores may have boosted orders as the holiday shopping season began last month.

Controlling Costs

Saks Inc. (SKS) is among retailers that have been innovating with inventory management systems to hold down costs.

“We’re doing lots of investment in terms of whether it’s inventory systems” or gathering information on consumers, Stephen Sadove, chief executive officer of Saks Inc., said in an interview with Bloomberg Television on Dec. 1.

Factory inventories, which account for almost 40 percent of total stockpiles, rose 0.9 percent in October, the Commerce Department said Dec. 5. Another 30 percent of all inventories, those held by wholesalers, rose 1.6 percent during the month, figures showed Dec. 8.

The reports signal wholesalers and factories stepped up inventory accumulation in October after depleting them in the third quarter. Further gains may signal stockpiling will add to growth in the final quarter of the year.

Inventories were reduced at an $8.5 billion annual pace in the third quarter, after increasing in the second quarter at a $39.1 billion rate, the Commerce Department said Nov. 22. The reduction in the July-September period subtracted 1.6 percentage points from gross domestic product, which rose at 2 percent pace.

It marked the first time since the final three months of 2009 that inventories were reduced.

To contact the reporter on this story: Bob Willis in Washington at bwillis@bloomberg.net

To contact the editor responsible for this story: Christopher Wellisz at cwellisz@bloomberg.net

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