Inventories at U.S. wholesalers rose in May for a fifth month as companies ensured they had enough goods on hand to keep pace with demand.
The 0.5 percent increase in the value of stockpiles followed a revised 0.2 percent gain the prior month that was smaller than previously estimated, the Commerce Department said today in Washington. Sales at distributors dropped 0.3 percent, the first decline since March 2009, after a 0.9 percent rise in April.
The amount of goods on hand compared with sales was close to a record low, indicating production will be sustained in coming months. Corporate spending on equipment, export growth and inventory rebuilding have contributed to growth since 2009 and may remain a source of strength for the rest of this year.
The inventory-to-sales ratio “suggests that firms are likely to continue to rebuild stock levels in the coming months,” Peter Newland, an economist at Barclays Capital Inc. in New York, said in a note to clients.
Economists forecast inventories would increase 0.4 percent, following a previously reported gain of the same amount for April, according to the median of 33 projections in a Bloomberg News survey. Estimates ranged from a drop of 0.4 percent to an increase of 0.8 percent.
Wholesalers make up about 30 percent of all business stockpiles. Factory inventories, which comprise slightly more of the total, declined 0.4 percent in May, the Commerce Department said last week. Retail stockpiles, which make up the rest, will be included in the July 14 business inventories report.
Today’s report showed wholesalers’ stockpiles of durable goods, or those meant to last several years, increased 0.7 percent in May. Machinery, computer equipment, electrical gear and cars led the gain.
The value of unsold non-durable goods rose 0.1 percent, while sales decreased 1 percent. Lower crude oil prices may have weighed on the value of non-durable sales and stockpiles. The average price of a barrel of crude oil traded on the New York Mercantile Exchange rose to $74.12 in May, from $84.58 a month earlier.
At the current sales pace, wholesalers had enough goods on hand to last 1.14 months, up from 1.13 months in April that was the lowest on record.
Reports for June suggest firms have built up inventories, potentially to the detriment of future production. The Institute for Supply Management said last week that its factory index fell to 56.2 in June.
Some manufacturers remain optimistic. Sales and inventories “are very much in sync,” Samuel Allen, chief executive officer of Deere & Co., said in an interview June 23 in a reference to the manufacturer’s agricultural business. The Moline, Illinois- based company also has started adding stockpiles on the construction side in recent months, he said.
“We do believe the recovery is under way,” Allen said. “We do believe it is moving slowly. We do believe it is on stable ground at this time.”