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U.S. February Wholesale Inventories Rise 0.9%, Sales Climb 1.2%

Wholesale Inventories Rise 0.9%, Sales Climb 1.2%
Boxes move down a conveyor line at a Supervalu Inc. distribution center in Hopkins, Minnesota. Photographer: Ariana Lindquist/Bloomberg

Inventories at U.S. wholesalers rose more than forecast in February as companies tried to keep pace with stronger demand.

The 0.9 percent advance in stockpiles followed a 0.6 percent gain in January that was more than initially estimated, the Commerce Department reported today in Washington. Economists projected a 0.5 percent rise, according to the median estimate in a Bloomberg News survey. Sales climbed 1.2 percent in February after no change a month earlier.

At the current sales pace, wholesalers had enough goods on hand to last 1.17 months, the same as in the prior four months, the report showed. Inventory rebuilding, which helped the economy grow in the fourth quarter at the fastest pace in more than a year, may still contribute less to the expansion in early 2012.

“Inventory growth has been running a little fast and may be a bit of a headwind” in the second quarter, Michael Feroli, chief U.S. economist at JPMorgan Chase & Co. in New York, said before the report.

Estimates in the Bloomberg survey of 31 economists ranged from increases of 0.2 percent to 1 percent.

Wholesalers’ stockpiles of durable goods, or those meant to last several years, increased 0.5 percent, boosted by hardware and machinery, today’s report showed. Sales of durable goods rose 0.9 percent. Car sales climbed 0.2 percent, while inventories fell 0.9 percent.

The value of unsold non-durable goods rose 1.4 percent, matching the rise in sales. Petroleum stockpiles jumped 5.6 percent, while purchases increased 3.9 percent. The gains probably reflect higher prices.

Fourth Quarter

The world’s largest economy expanded at a 3 percent annual rate in the fourth quarter after a 1.8 percent pace in the prior three months, Commerce Department figures showed on March 29. Growth excluding a jump in inventories was 1.1 percent. Stockpiles were rebuilt at a $52.2 billion annual pace, adding 1.8 percentage points to growth.

The surge in stockpiles last quarter followed a reduction in the July through September period amid mounting concern that Europe’s debt crisis would restrain demand at a time the U.S. labor market was struggling to pick up.

Labor Department figures last week indicated demand may struggle to accelerate. Employers in the U.S. boosted payrolls less than forecast in March, the Labor Department reported last week, indicating that companies are reluctant to hire in the weak expansion.

Companies like Brocade Communications Systems Inc. are keeping inventories in line with demand.

Reductions in Inventories

“We’ve seen inventory levels from what we saw mid last year to now come down fairly dramatically,” Chief Financial Officer Daniel Fairfax said.

The company’s original equipment manufacturers currently hold between a week and two week’s supply, he said.

“When the OEMs don’t have to invest in inventory that’s not productive, they take some of the pricing pressure off us as the manufacturer,” Fairfax said on April 4 at a technology summit.

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 February, the Commerce Department said April 3. Retail stockpiles, which make up the rest, will be included in the April 16 business inventory report.

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