Inventories Rise, Signaling Weak Growth
Businesses have been stockpiling more goods this spring as consumer spending has slowed, government figures show. Analysts said these are the latest signs pointing to production cuts and weak growth for the economy.
The Commerce Department said Wednesday that inventories in April saw an 0.8% gain, led by a buildup in interest-rate-sensitive durable goods. It was the 13th straight monthly increase. Sales fell 0.4% in April. That came atop a 0.1% decline in March, marking the first time in more than four years that the figures slipped for two straight months.
“The sound you hear from America’s warehouses is the sound of inventory being put back on shelves,” said Ron Schreibman of the National Assn. of Wholesaler-Distributors.
In an encouraging development on the inflation front, the Labor Department reported that American workers’ productivity increased at a 2.7% annual rate for the first quarter. The department also said that unit labor costs--typically two-thirds of the cost of a product--rose 1.6%, or about half as much as had been estimated about a month ago.
The reports buttress the view that the country is in for slow growth and low inflation, analysts said.
“An inventory correction will probably stretch over several quarters rather than being concentrated into a single period,” economist Bruce Steinberg of Merrill Lynch & Co. said.
Some commentators predict that the economy will experience flat growth or even contract in the second quarter. But many expect a rebound in the second half of the year, even if the Federal Reserve Board leaves short-term interest rates unchanged.
“We are making progress in eliminating unwanted inventories,” said Astrid Adolfson of MCM MoneyWatch, a New York City financial advisory firm. “It’s still plausible to have a soft landing even if the second quarter is negative.”
The latest inventory gain, roughly in line with analysts’ expectations, was led by a 1% increase among durable goods, particularly automobiles. Inventories of durable goods have surged 10.8% since April of last year. Inventories of non-durable goods such as food and fuel rose 0.5%, meaning they were 6.6% higher than a year ago.
The Commerce Department said inventories totaled a seasonally adjusted $949.9 billion for April, up from $942.7 billion for March. April inventories were 9.1% higher than a year earlier.
Sales for April stood at a seasonally adjusted $672.2 billion, down from $674.8 billion.
The government reported Tuesday that retail sales--which account for about a third of all sales--rose a sluggish 0.2% in May.
The inventory-to-sales ratio rose to 1.41, the highest it has been since July, 1994, when it was also 1.41. The last time it was higher was in November, 1993, when it stood at 1.42. The May figure means that it would take 1.41 months to exhaust stockpiles at the April sales rate.
Retail inventories rose to $298.9 billion in April, up 0.9%. Stockpiles at the wholesale level were at $246.4 billion, a 1.2% increase. Manufacturers’ inventories rose 0.6% to $404.6 billion.
Business sales in April at the retail level were at $192.5 billion, down 0.3%. At the wholesale level, they rose 0.5% to $184.1 billion. Factory sales fell 0.9% to $295.6 billion.
