Ahead of the Bell: Business Inventories

AP News
Posted: Jul 14, 2011 7:15 AM
Ahead of the Bell: Business Inventories

Businesses added to their stockpiles for a 17th consecutive month in May, economists say, but a slowdown could be coming as companies trim unwanted inventories.

Economists expect business supply levels grew 0.6 percent in May, according to a survey of analysts by FactSet. The Commerce Department will release the report at 8:30 a.m. Eastern on Thursday.

In April, inventories grew 0.8 percent and sales rose for the 10th straight month. But the modest 0.1 percent increase in sales was the smallest in nearly a year, a sign that the economy weakened this spring.

Still, the rise pushed total stockpiles to $1.50 trillion. That's up 13.4 percent from the recent low of $1.32 trillion reached in September 2009, when businesses were slashing inventories to control costs in the wake of the deep recession.

Bleak job growth and higher-than-normal gas prices have shaken consumer confidence.

For June, the unemployment rate inched up to 9.2 percent and payrolls grew by just 18,000 jobs, the worst showing in nine months. That payroll growth was down significantly from an average of 220,000 jobs being created each month from February through April.

Manufacturing has been one of the strongest sectors of the economy since the recession ended two years ago. Factory activity expanded at a faster pace in June after slowing sharply in May, according to the Institute for Supply Management. Economists have said they expect manufacturing growth to continue in the coming months, but they have cautioned that the gains are likely to be smaller than activity over the past year.

Supply disruptions stemming from the natural disasters in Japan have led to shortages of auto and electronic parts. Falling-but-still-high gas prices this summer has hurt consumer spending, which makes up 70 percent of economic activity.