Create a free account to continue

Wholesale Stockpiles Rose In May, Sales Dipped

The Commerce Department said wholesale inventories rose 1.8 percent, but sales dropped for only the second time in the past 11 months.

WASHINGTON (AP) -- Wholesale companies added to their stockpiles for a 17th straight month in May but their sales declined for only the second time in the past 11 months, providing further evidence of the economy's spring slowdown.

The Commerce Department said Friday that wholesale inventories rose 1.8 percent in May, the biggest gain since October. Some of that increase reflected an unwanted buildup of goods because sales declined.

Sales at the wholesale level fell 0.2 percent, the report said. The sales drop was led by a big decline in auto sales and the inventory buildup also reflected a large rise in auto stockpiles.

The weakness in May sales offered the latest evidence that the economy slowed in the spring as consumers struggled with soaring gas prices and high unemployment.

U.S. manufacturing has been one of the strongest sectors of the economy since the recession ended two years ago with factory production being supported by concerted efforts on the part of businesses to restock depleted shelves. With the May rise in inventories, stockpiles are now 18.9 percent higher than their low point hit in September 2009.

Factory activity weakened this spring, in part because of temporary factors. High gasoline prices forced consumers to spend less elsewhere, which cut demand for factory goods. And the March 11 earthquake and tsunami in Japan led to supply-chain disruptions that slowed U.S. manufacturing production, particularly in the auto and computer industries.

There are signs that those impediments are lifting. Gas prices have dropped considerably since peaking in early May at a national average of nearly $4 per gallon. And manufacturing activity expanded in June at a faster pace than the previous month, according to the Institute for Supply Management. That suggests the parts shortage is beginning to abate.

The economy grew at an annual pace of 1.9 percent in the first three months of the year. Analysts are expecting similarly weak growth in April-June quarter.

Growth is expected to pick up to a 3.2 percent pace in final six months of the year, according to an Associated Press survey of 38 economists.

Still, growth must be stronger to significantly lower the unemployment rate. The economy would need to grow 5 percent for a whole year to significantly bring down the unemployment rate. Economic growth of just 3 percent a year would hold the unemployment rate steady and keep up with population growth.