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Business Title: Inventories at U.S. Wholesalers Jumped in May Inventories at U.S. wholesalers rose more than forecast in May, led by the biggest jump in auto stockpiles in five years. The 1.8 percent increase in goods on hand compared with a 0.7 percent gain forecast in a Bloomberg News survey and followed a revised 1.1 percent increase in April that was larger than initially estimated, Commerce Department figures showed today in Washington. Sales decreased 0.2 percent in May, the first drop in three months and also reflecting a slump in vehicle demand. Slowing purchases may prompt distributors to keep a tight rein on inventories, a sign orders to factories may diminish as companies gauge the sustainability of the expansion. At the current sales pace, wholesalers had enough goods on hand to last 1.16 months, the most this year. “The pace of inventory investment has been picking up relative to spending,” Aaron Smith, a senior economist at Moody’s Analytics Inc. in West Chester, Pennsylvania, said before the report. “Consumer spending should accelerate this quarter, justifying a moderate rate of inventory accumulation.” The median projection was based on a survey of 32 economists. Estimates ranged from an increase of 0.3 percent to 1.1 percent. The April reading was revised from a previously reported 0.8 percent increase. Employers added 18,000 workers in June, the fewest in nine months, and the unemployment rate unexpectedly climbed, indicating a struggling labor market, a report from the Labor Department also showed today. The increase in payrolls followed a 25,000 gain that was less than half the rise initially estimated. The unemployment rate rose to 9.2 percent, the highest level this year. Hiring by companies, which excludes government agencies, was the weakest since May 2010. Wholesalers’ stockpiles of durable goods, or those meant to last several years, increased 1.8 percent in May, led by a 4.7 percent jump in automobiles that was the biggest since April 2006, today’s report showed. Part of the increase may have been unintended as car sales plunged 10 percent, the biggest decline since November 2008 when the economy was still in the recession. Auto sales fell to an annual rate of 11.76 million units in May from 13.14 in April, according to industry data. They dropped to a 11.41 million pace in June as demand for small cars decreased on caution that carmakers would take advantage of the thin supply to raise prices. Toyota Motor Corp. (7203) and Honda Motor Co.’s U.S. deliveries each fell 21 percent in June from a year earlier, while General Motors Co. and Ford Motor Co. saw sales gain 10 percent, less than estimates, according to industry data on July 2. Toyota’s market share dropped to 10.2 percent last month from 14.8 percent a year earlier, according to Autodata. The value of unsold non-durable goods inventories increased 1.7 percent as purchases climbed 0.1 percent. Clothing wholesalers led the gain with a 3.4 percent jump in stockpiles. High-end realtor Neiman Marcus Inc. this week reported revenues rose 12.7 percent in June from a year earlier, led by sales in the Southeast, Northeast and Texas. “Our inventory is in great shape and is in balance with current customer trends,” Chief Executive Officer Karen Katz said on a conference call the prior month. Inventory rebuilding, a major driver of the early stages of the economic recovery in 2009, sped up in the first quarter, contributing 1.3 percentage points to gross domestic product, according to Commerce Department data. It subtracted 3.4 percentage points from growth in the fourth quarter of 2010. Wholesalers make up about 30 percent of all business stockpiles. Factory inventories, which comprise about 38 percent of the total, grew 0.8 percent in May, the Commerce Department said July 5. Retail stockpiles, which make up the rest, will be included in the July 14 business inventories report.
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