Shrinking Stockpiles Hint at Future Economic Growth

WASHINGTON — Wholesalers cut back on restocking in May even as sales rose, indicating that economic growth could pick up later this year as they rebuild their stockpiles.

The Commerce Department said on Wednesday that wholesale stockpiles shrank 0.5 percent in May, the most in 20 months. That followed a 0.1 percent decline in April, which was revised lower.

Sales at the wholesale level increased 1.6 percent in May and 0.7 percent in April.

A reduction in stockpiles may prompt economists to cut their growth forecasts for the April-June quarter. But the steady gain in sales suggests companies may have to order more goods in the coming months to keep up with demand. That could bolster factory production and drive more economic growth in the second half of the year.

Auto sales jumped 3 percent in May, yet stockpiles were unchanged. And sales of durable goods, items meant to last at least three years, rose 0.3 percent, while inventories of those goods fell by the same amount.

Sales of nondurable goods rose 2.8 percent, the most in more than two years. The gain was caused by large increases in sales of clothing, groceries and pharmaceuticals. Stockpiles of those goods declined 0.8 percent.

Stockpiles of farm goods fell sharply for the second straight month, dropping 6 percent. That most likely reflected the impact of a severe drought last year, which has resulted in lower stockpiles this spring.

Overall wholesale stockpiles totaled $500.9 billion in May, 3.3 percent higher than a year ago.

Much of the recent data suggest the second half of the year could be stronger, helped by steady job growth, a resilient consumer and a sustained recovery in housing.

Employers have added 202,000 jobs a month through the first six months of the year. That is up from 180,000 in the previous six months.

More Americans are earning paychecks, which increases overall income and supports more spending.

Article source: http://www.nytimes.com/2013/07/11/business/economy/shrinking-stockpiles-hint-at-future-economic-growth.html?partner=rss&emc=rss