Inventories at U.S. wholesalers rose in May at a slower pace as sales dropped by the most in three years.
The 0.3 percent gain in stockpiles followed a 0.5 percent increase in April that was smaller than previously estimated, the Commerce Department reported today in Washington. Sales decreased 0.8 percent, the biggest decline since March 2009.
Businesses are lowering inventories in line with concern about the outlook for demand, indicating stockpiling will contribute less to gross domestic product. Wholesalers had goods on hand to last 1.18 months at the current sales pace, the most since July 2011.
“Demand’s been unimpressive, though we’ve had some decent inventory growth in the last couple quarters, and I think it’s time for some slowing,” David Sloan, a senior economist at 4Cast Inc. in New York, said before the report. Third-quarter GDP growth is likely to suffer from the slackening demand, he said.
The median estimate in a Bloomberg survey of 29 economists called for a 0.3 percent gain. Forecasts ranged from a drop of 0.2 percent to an increase of 0.5 percent.
Another report today showed the trade deficit narrowed in May as falling crude oil prices and weakening demand for consumer goods trimmed the import bill. The gap shrank 3.8 percent to $48.7 billion, in line with the median estimate of economists surveyed by Bloomberg, from $50.6 billion in April, according to Commerce Department figures. Purchases from abroad fell to the lowest level in three months, while exports climbed to the second-highest on record.
Wholesalers make up about 30 percent of all business stockpiles. Factory inventories, which comprise about 38 percent of the total, rose 0.7 percent in May after a revised 0.7 percent drop in the previous month, the Commerce Department said on July 3. Retail stockpiles, which make up the rest, will be included in the July 16 business inventory report.
Wholesalers’ inventories of durable goods, or those meant to last several years, climbed 0.6 percent after rising 1.2 percent in April, today’s report showed. Sales of durable goods increased 0.6 percent.
Stockpiles of non-durable goods dropped 0.2 percent in May as sales declined 1.9 percent. The decrease in demand may reflect falling prices for products like petroleum and clothing.
Stockpiles contributed less to economic growth in the first three months of 2012 than in the fourth quarter. The world’s largest economy expanded at a 1.9 percent annual rate in the first quarter, slower than the fourth quarter’s 3 percent pace. Stockpiles contributed 0.1 percentage point to gross domestic product during the period, down from 1.8 percentage points in the final three months of 2011.
“While the second quarter produced solid results, we continue to operate in a challenging environment with customers and consumers under pressure in many of our markets,” Alan D. Wilson, chairman, president and chief executive officer of spice producer McCormick & Co. Inc., said on a June 27 earnings call.
The European fiscal crisis continues to pose risks to business, Wilson said. “In Europe, consumer confidence is low. Austerity measures are adding pressure and economic and political uncertainty persists.”