U.S. Business Inventories Rose 0.1% in June as Sales Slumped
Inventories in the U.S. rose in June at the slowest pace in nine months as a slump in sales gave companies little incentive to keep more goods on hand.
The 0.1 percent increase in stockpiles followed a 0.3 percent gain in May, Commerce Department data showed today in Washington. The median forecast in a Bloomberg survey projected a 0.2 percent gain. Sales fell 1.1 percent in June, the biggest decrease since March 2009.
Manufacturers, burdened by slower global economic growth, may find companies will place fewer orders and limit investment until households pick up the pace of spending. Another report today showed retail sales rebounded in July after dropping a month earlier.
“Businesses are just keeping a very close watch on their inventories, given the European and fiscal uncertainties,” Aaron Smith, a senior economist at Moody’s Analytics Inc. in West Chester, Pennsylvania, said before the report. “They’re just being very careful with respect to how much, or how quickly, they’re increasing their inventories.”
Businesses had enough goods on hand to last 1.29 months at the current sales pace in June, the highest since February 2010, from 1.27 months in May.
The median forecast for business inventories was based on a Bloomberg survey of 46 economists. Estimates ranged from a decline of 0.1 percent to a gain of 0.4 percent.
Another Commerce Department report today showed July retail sales increased 0.8 percent, more than forecast, after a 0.7 percent decrease a month earlier.
Retailer stockpiles, the only part of today’s inventory report not previously reported, rose 0.6 percent in June.
Inventories helped add to economic growth in the second quarter even as spending cooled. The economy expanded at a 1.5 percent annual rate from April through June, after a 2 percent pace in the prior three months, Commerce Department data show.
Stockpiles contributed 0.3 percentage point to growth after subtracting 0.4 percentage point in the first quarter.
Wholesale inventories, which make up about 30 percent of all stockpiles, fell 0.2 percent in June after no change in May.
Factory inventories, which comprise about 38 percent of total stockpiles, increased 0.1 percent in June following a 0.1 percent decrease a month earlier.
Sonoco Products Co. (SON), a Hartsville, South Carolina-based maker of industrial and consumer packaging products, is among companies seeing fewer orders on concern about the expansion.
“Our customers are continuing to keep inventories low and are scheduling orders based solely on known demand, due to the economic uncertainty,” M. Jack Sanders, Sonoco’s president and chief operating officer, said at an Aug. 9 conference.
“If we see continued improvement in residential and multi- family construction, it could have a positive impact” on demand for the consumer and industrial packaging company, Sanders said.
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