August 7, 2022

As Sales Decline, Wholesale Inventories Grow

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.

Manufacturing has been one of the strongest sectors of the nation’s economy since the recession ended two years ago; factory production has been 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 lowest level, hit in September 2009.

Factory activity weakened this spring, in part because of temporary factors. High gasoline prices caused 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 manufacturing in the United States, 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 a gallon. And manufacturing activity expanded in June at a faster pace than in 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 rate of 1.9 percent in the first three months of the year. Analysts are expecting similarly weak growth in the April-June quarter.

Growth is expected to pick up to a 3.2 percent rate in the 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 at a 5 percent pace for a whole year to significantly bring down the unemployment rate. Economic growth of just 3 percent a year will simply keep up with population growth and hold the rate steady.

In another report, the Federal Reserve said consumers took on more debt in May and used their credit cards more for only the second time in nearly three years.

The Federal Reserve said Friday that consumer borrowing rose $5.1 billion in May, the eighth consecutive monthly increase. It followed a revised gain of $5.7 billion in April. Borrowing in the category that covers credit cards increased, as did borrowing in the category for auto and student loans.

The overall increase pushed consumer borrowing to a seasonally adjusted annual level of $2.43 trillion in May. That was just 1.7 percent higher than the nearly four-year low of $2.39 trillion hit in September.

The increase in credit card borrowing marked only the second monthly gain since August 2008. Households began borrowing less and saving more when unemployment spiked during the recession. The category is down 4.4 percent over the last year and 18.5 percent from its peak in August 2008.

Article source: http://feeds.nytimes.com/click.phdo?i=eb3f58cecd0beccf9cd1a7bec33fc455

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