Business Inventories in U.S. Rose 0.8% as Sales Rebounded

Inventories in the U.S. climbed in July by the most in six months as companies kept stockpiles in line with demand.

The 0.8 percent increase in stockpiles followed a 0.1 percent gain in the prior month, Commerce Department data showed today in Washington. The median forecast in a Bloomberg survey called for a 0.4 percent gain. Sales at factories, wholesalers and retailers rose 0.9 percent after falling 1.2 percent.

Inventory replenishment, which helps to boost growth, may cool this year as a global slowdown and looming U.S. tax and government spending changes restrain orders. Stockpiles of retailers increased in July as sales cooled, indicating they may place fewer orders with factories.

“Excess stocks will have to be worked off,” Joel Naroff, president of Naroff Economic Advisors Inc. in Holland, Pennsylvania, said before the report. That means “even more reductions in output.”

Stocks climbed as markets rallied around the world on the Federal Reserve’s bond-purchase program, announced yesterday. The Standard & Poor’s 500 Index rose 0.6 percent to 1,469.28 at 10:04 a.m. in New York.

At the current sales pace, businesses had enough goods on hand to last 1.28 months, down from 1.29 months in June.

The median forecast for business inventories was based on a Bloomberg survey of 48 economists. Estimates ranged from no change to an increase of 0.7 percent.

A separate Commerce Department report today showed retail sales climbed in August as demand increased for automobiles and higher gasoline prices led to a pickup in service station receipts.

Retail Inventories

Retailers’ inventories, the only part of today’s report not previously released, rose 1.1 percent as sales increased 0.7 percent.

Labor Department figures last week indicated consumers may restrain their spending, which accounts for about 70 percent of the economy. Payrolls slowed, rising by 96,000 workers in August after a revised 141,000 increase in July. The unemployment rate fell as more people left the labor force, while wages stagnated.

Texas Instruments Inc. (TXN), the largest maker of analog chips, is among companies noting that business customers want to keep stockpiles closely aligned with demand.

“I don’t think our customers are shedding inventory,” Stephen Anderson, senior vice president of the Dallas-based company’s high-performance analog group, said in an Aug. 14 teleconference with analysts. “I just think they’re not adding enough.”

Wholesale inventories, which account for up about 30 percent of all business stockpiles, increased 0.7 percent in July, the most in five months, as sales declined for the third straight month, Commerce Department data showed earlier this week. Factory inventories, which comprise about 38 percent of the total, rose 0.5 percent in July.

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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