Ahead of the Bell: US Wholesale Inventories

AP News
Posted: Sep 12, 2012 4:22 AM
Ahead of the Bell: US Wholesale Inventories

WASHINGTON (AP) — The government on Wednesday will offer a signal of the economy's health in the second half of the year when it reports how much U.S. wholesalers adjusted their stockpiles in July.

Wholesale companies cut back 0.2 percent on restocking in June and sales fell 1.4 percent, the biggest drop in three years.

The steeper drop in sales means it would take longer for wholesalers to clear out their stockpiles. They often respond by ordering fewer goods in the coming months to keep their stockpiles from getting any larger, which lowers factory production and slows economic growth.

The Commerce Department will report on stockpile growth and sales at the wholesale level at 10 a.m. EDT Wednesday.

Economists forecast that sales at the wholesale level increased 0.7 percent in July, according to a survey by Factset. That would represent a rebound from June and could prompt wholesalers to boost restocking later this year.

June's decline in restocking was the largest in nine months. Even with the slight dip, stockpiles at the wholesale level are about 25 percent above the post-recession low of $384.9 billion hit in September 2009.

U.S. factory activity shrank in August for the third straight month, according to the Institute of Supply Management's closely watched manufacturing survey.

A weaker global economy has cut demand for U.S. exports. The U.S. trade deficit grew to $42 billion in July from June, the government said Tuesday. Fewer exports to Europe, India and Brazil offset a steep decline in oil imports.

At the same time, tepid growth in U.S. hiring has made American consumers more cautious about spending.

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U.S. employers added just 96,000 jobs in August. That's down from 141,000 in July and far below the average 226,000 a month created in the January-March quarter.

Growth slowed in the April-June quarter to an annual rate of just 1.7 percent, down from 2 percent in the January- March quarter and 4.1 percent in the final three months of last year.

Many economists expect growth will remain roughly 2 percent in the second half of the year, well short of what is needed to make a significant dent in the unemployment rate.

Stockpiles at the wholesale level account for about 27 percent of total business inventories. Stockpiles held by retailers make up about one-third of the total and manufacturing inventories represent about 40 percent of the total.