Business Inventories in U.S. Increased in April as Sales Cooled

Companies in the U.S. boosted inventories in April as sales cooled, indicating orders to factories may slow.

The 0.4 percent increase in stockpiles followed a 0.3 percent gain in March, Commerce Department data showed today in Washington. The median projection in a Bloomberg News survey predicted a 0.3 percent advance. Sales climbed 0.2 percent for a second month.

Some of the increase in inventories may be unintended as demand in the world’s largest economy slows, signaling companies will place fewer orders. Another report today showed retail sales dropped in May for a second month, the first back-to-back decrease since 2010.

“Retail sales are going to continue to grow sluggishly, and the inventories are going to grow sluggishly,” Michael Montgomery, a U.S. economist with IHS Global Insight in Lexington, Massachusetts, said before the report. At the same time, “inventories compared to sales are in fantastic shape.”

The median forecast for business inventories was based on a Bloomberg survey of 40 economists. Estimates ranged from gains of 0.1 percent to 0.7 percent. March’s figure was unrevised.

Another Commerce Department report today showed retail sales fell 0.2 percent in May as slower employment and subdued wage gains damped demand, a sign the economy is cooling. The decrease followed a similar decline in April that was previously reported as a gain.

Retailer Inventories

Retailer stockpiles, the only part of today’s inventory report not previously reported, increased 0.6 percent in April while sales dropped 0.3 percent.

Businesses had enough goods on hand to last 1.26 months at the current sales pace, the same as in March.

The U.S. economy expanded at a 1.9 percent annual rate in the first quarter, down from a 3 percent pace in the prior three months, Commerce Department figures show.

Part of the slowdown reflected less support from inventories. Stockpiles added 0.2 percentage points to growth in the first three months of 2012, compared with 1.8 points in the prior period.

Wholesale inventories, which make up about 30 percent of all stockpiles, rose 0.6 percent in April, the Commerce Department reported June 8, following a 0.3 percent increase in March. Factory inventories, which comprise about 38 percent of total stockpiles, were unchanged in April, the government said June 4.

“In the environment where these distributors are still very cautious, they are basically still living hand to mouth,” Emeka Chukwu, senior vice president and chief financial officer of Semtech Corp., said during a June 6 conference call. “I haven’t seen the restocking yet. So hopefully, that is something that is still ahead of us.”

To contact the reporter on this story: Michelle Jamrisko in Washington at mjamrisko@bloomberg.net

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

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