Wholesale Inventories at Highest Level on Record

Inventories of goods at U.S. wholesalers soared in August to the highest level on record as sales slumped, according to government figures released Wednesday.

Inventories were up 0.5% from July to the highest level since the government began tracking the figures in 1980, the Commerce Department said, as stocks of autos, lumber and metal products piled up. The gain was accompanied by a 0.9% drop in sales.

A glut of unsold goods could be a drag on manufacturing, even if demand picks up later in the year, because companies could easily fill orders from existing stock rather than by stepping up production.

“When this kind of number says inventories are piling up because people are cutting back on spending, then it reduces the threat” that manufacturers will have to scramble to catch up with demand later this year, said Patrick Kennedy, director of economic research at International Securities Group Inc. in San Diego.

Such a trend would then minimize the risk that a surge in growth could force wages and prices higher.

The report released Wednesday provides only part of the inventory picture. Next week, the Commerce Department will supply the remaining pieces with its report on business inventories, which includes stocks of goods at all levels, from manufacturer to wholesaler to retailer. Economists expect that report to say that inventories rose 0.3% in August, after increasing 0.4% in July.

At the retail level, at least, inventories are rising in part because merchants are preparing for the Christmas shopping season.

Despite the figures, some industries don’t yet see the kind of slump in demand that would constitute a signal to throttle back on production.

Analysts surveyed by Bloomberg Business News had expected an average 0.2% increase in August wholesale inventories.