Business Sales Jump 0.9% in Good Sign for Economy

Business sales shot up 0.9% in May, the biggest jump in three months, while inventories rose modestly, the government said today in a report indicating continued economic growth.

The Commerce Department said sales totaled a seasonally adjusted $538.3 billion, up 0.9%. It was the strongest increase since February, when sales rose 1.4%, and followed a 1.0% decline in April.

Inventories held on shelves and back lots in May totaled a seasonally adjusted $799.4 billion, up 0.4% following a 0.3% increase in April.

The combination of strong sales and a moderate increase in inventories produced a 1.48 ratio of inventories to sales, down slightly from 1.49 in April. The ratio means that it would take 1.48 months to exhaust the backlog of goods at the May sales pace.

Today’s report, which was in line with economists’ expectations, provided fresh evidence that the economy is not in danger of toppling immediately into a recession.

If inventories were to rise excessively in relation to sales, it could cause production cutbacks and job layoffs at factories as businesses attempted to sell off their goods backlog.

Inventories have remained under control so far this year despite lackluster economic growth.

Manufacturers showed the biggest sales gain in May, 2.0%, while sales fell 0.6% at retail stores. Wholesalers reported a 0.6% increase.

In an advance estimate, the Commerce Department said last week that retail sales rose 0.5% in June, the first increase in five months.

The increase in inventories, meanwhile, was greatest at wholesale establishments, up 1.2%. Retail backlogs rose a moderate 0.4% while inventories at factories were unchanged.