Inventories at U.S. wholesalers rose in July by the most in five months as sales fell, indicating production may cool.
The 0.7 percent increase in stockpiles followed a 0.2 percent drop in the prior month, Commerce Department data showed today in Washington. The median forecast in a Bloomberg survey called for a 0.3 percent July gain. Sales declined 0.1 percent, the third straight decrease.
At the current pace of sales, wholesalers had enough goods on hand to last 1.21 months, the most since November 2009, the report showed. A global slowdown and looming U.S. tax and government spending changes may prompt companies to temper orders to factories as they work off any unintended build-up of stockpiles.
“Companies will want to stay lean because of the outlook,” Millan Mulraine, a senior U.S. strategist at TD Securities in New York, said before the report. “The uncertainty is a constraint on demand.”
The median forecast for wholesale inventories was based on a Bloomberg survey of 29 economists. Estimates ranged from no change to an increase of 0.8 percent.
Businesses trying to keep stockpiles in line with demand include Deere & Co., the world’s largest maker of agricultural equipment, which in August cut its full-year profit forecast as sales slowed.
“The sales shortfall is reflected in higher inventories in the third quarter and at year-end,” James Field, president of the Moline, Illinois-based company’s agriculture and turf unit, said on an Aug. 15 teleconference. “Actions have been taken to manage the inventories.”
Wholesalers’ stockpiles of durable goods, or those meant to last several years, increased 0.7 percent, boosted by machinery, computers, lumber and automobiles, today’s report showed. Sales of big-ticket items dropped 0.8 percent after a 0.9 percent decrease.
The value of unsold non-durable goods also rose 0.7 percent as sales climbed 0.5 percent.
The inventory-to-sales ratio climbed from 1.20 months in June.
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. The unemployment rate fell as more people left the labor force, while wages stagnated.
Wholesalers make up about 30 percent of all business stockpiles. Factory inventories, which comprise about 38 percent of the total, rose 0.5 percent in July, Commerce Department data showed. Retail stockpiles, which make up the rest, will be included in the business inventories report due on Sept. 14.