Ahead of the Bell: Wholesale Inventories

AP News
Posted: Nov 06, 2009 6:22 AM

Businesses likely slashed wholesale inventories for a record 13th consecutive month in September. But analysts expect sales rose for a sixth straight month.

Steadily rising sales could encourage businesses to restock shelves, boost production and bolster an economic recovery. The concern is that consumer spending, which accounts for 70 percent of economic activity, could falter as various government stimulus programs begin to wane.

Economists surveyed by Thomson Reuters expect inventories held by wholesalers dropped 1 percent in September, following a 1.3 percent decline in August.

Wholesale sales likely rose 0.6 percent, down from a 1 percent gain in August, which was the biggest increase since June 2008.

The Commerce Department is scheduled to release the report at 10 a.m. EST Friday.

Car sales soared in August because of the government's Cash for Clunkers program. But sales fell sharply in September after the incentives program ended.

General Motors Co. reported that its sales plunged 45 percent in September from the previous year, while Chrysler Group LLC reported a 42 percent decline. Ford Motor Co. reported a 5.1 percent decline.

But October's retail sales results were the best since April 2008, according to a report by the International Council of Shopping Centers-Goldman Sachs. Sales at stores open at least a year rose 2.1 percent, compared with a 4.2 percent drop in October 2008. The October results beat estimates for a 1 percent gain and followed a surprising 0.6 percent increase in September.

Sales at stores open at least a year are considered a key indicator of a retailer's health. Bright spots included Costco Wholesale Corp.; TJX Cos., which operates T.J. Maxx and Marshalls; and Gap Inc. Sales at most teen merchants were weak.

Wholesale inventories are goods held by distributors who generally buy from manufacturers and sell to retailers. They make up about 25 percent of all business stockpiles. Factories hold another third of inventories and retailers hold the rest.

The decline in inventories is the longest stretch on government records that date to 1992. The previous record was nine straight declines during a period that covered the nation's last recession in 2001.