U.S. Economy Wholesale Inventories Rise More Than Forecast
U.S. Economy: Wholesale Inventories Rise More Than Forecast
By Bob Willis
Feb. 8 (Bloomberg) — Inventories at U.S. wholesalers rose
the most in more than a year as sales fell, signaling companies
will need to cut production and that the economy may be slipping
toward a recession.
Stockpiles increased 1.1 percent in December after a 0.8
percent gain the previous month that was larger than originally
reported, the Commerce Department said today in Washington. The
increase was almost four times the 0.3 percent median estimate
of economists surveyed by Bloomberg News.
“This is exactly what we see when we go into a
recession,;; said Chris Rupkey, senior financial economist at
Bank of Tokyo-Mitsubishi UFJ Ltd. in New York. “As inventories
continue to accumulate, companies are going to cut back on
production and possibly reduce headcounts.;;
Sales dropped 0.7 percent, the most since January, led by
declines at auto, computer and electrical distributors.
Economists now consider a recession an even bet as the housing
contraction continues and consumer spending slows, according to
a monthly survey by Bloomberg published today.
Wholesalers account for about a quarter of all business
stockpiles. Factory inventories, which make up about a third of
the total, rose 0.8 percent in December, the government said
last week. Retail inventories, which make up the remainder, will
be included in the Feb. 13 business inventories report.
Economists; Forecasts
The median estimate was based on 39 forecasts in a
Bloomberg News survey. Projections ranged from a 0.5 percent
decline to an increase of 1.0 percent.
Treasury securities, which had risen earlier in the day,
stayed higher after the report. Ten-year yields fell to 3.68
percent at 10:42 a.m. in New York, from 3.76 percent late
yesterday.
The decrease in sales brought the supply of stockpiles on
hand up to 1.09 months from 1.07 months in November.
The inventory number released today may boost estimates for
fourth-quarter growth as unsold goods piled up. The need to
reduce stocks may cause a reduction in forecasts for this
quarter.
Today;s reported increase in stockpiles was led by a 3.5
percent rise in automobile inventories, the biggest since April
2006, as sales dropped 2.2 percent. Stockpiles of oil products
rose 9.2 percent.
General Motors Corp., the largest carmaker, has been
focusing on working off inventories for the last three years.
“We;ve significantly reduced our dealer stocks,;; said GM
Chief Executive Officer Richard Wagoner on a Jan. 17 conference
call. The drawdown “leaves us in what we think is a very good
inventory position at a time that the U.S. industry continues to
be obviously under some pressure.;;
A slump in January car purchases holds out little hope for
a quick turnaround. Cars and light trucks sold at a 15.2 million
annual pace in January, the worst showing since October 2005.
Stockpiles of non-durable goods, such as oil and farm
products, rose 1.6 percent, and inventories of durable goods
climbed 0.9 percent.
A preliminary Commerce report last month showed companies
reduced stockpiles at a $3.4 billion annual pace in the fourth
quarter, led by a drop in automobiles.
The decline subtracted 1.3 percentage points from growth
after adding 0.9 point in the third quarter. A 27 percent drop
in production by carmakers in the last three months of 2007
subtracted 1 percentage point from growth.
Manufacturing surveys indicate factories began 2008 on the
verge of a contraction. The Institute for Supply Management;s
index of manufacturing activity rose to 50.7 in January from
47.7 the prior month, which was the lowest since April 2003, the
Tempe, Arizona-based group said Feb. 1. A reading above 50
indicates growth.
To contact the reporter on this story:
Bob Willis in Washington at
