Business stockpiles rose for 16th month in April

AP News
Posted: Jun 14, 2011 11:26 AM
Business stockpiles rose for 16th month in April

Businesses added to their stockpiles for a 16th consecutive month in April. But their sales grew at the slowest pace in 10 months, supporting other data that show the economy weakened this spring.

Supply levels grew 0.8 percent in April and sales rose for a 10th straight month, the Commerce Department said Tuesday. But the 0.1 percent sales increase was the smallest since sales fell 0.5 percent in June of last year.

Economists said the decline in sales growth was not a concern because the ratio of inventories to sales remains at historically low levels. It would take only 1.26 months to exhaust current stockpiles at the April sales pace. That compares with a high of 1.48 months hit in early 2009 when sales were plunging during the recession and businesses were caught with unwanted stockpiles.

Steven Wood, chief economist at Insight Economics, said because of the low level of inventories compared to sales, he was not concerned about a slowdown triggered by businesses trying to trim unwanted stockpiles.

"Because the inventory-to-sales ratio is quite low, inventory investment should be modestly positive, on balance, over the next year, as long as sales continue to grow," he said.

For April, inventories rose at all levels of business. Stockpiles held by manufacturers rose 1.3 percent. Inventories held by wholesalers rose 0.8 percent.

Retailers only increased their stockpiles 0.1 percent. That small rise reflected a 0.3 percent increase in inventories of autos and auto parts and declines in inventories of furniture and building materials. Clothing stockpiles increased 0.3 percent.

The impact of higher gas prices has shaken consumer confidence and a bleak jobs report in May likely added to consumer gloom. A separate report Tuesday showed that retail sales fell for the first time in 10 months in May, reflecting the biggest drop in auto sales in 15 months.

The unemployment rate inched up to 9.1 percent in May and payrolls grew by only 54,000 jobs, the poorest showing in eight months and down significantly from average monthly growth of 220,000 jobs from February through April.

U.S. manufacturing has been one of the strongest sectors of the economy since the recession ended two years ago. But a report from the Institute for Supply Management showed that factory activity cooled in May, expanding at the slowest pace in 20 months.

Economists have said they expect manufacturing growth to continue in coming months, but they have cautioned that the gains are likely to be smaller than activity over the past year.