U.S. Wholesale Inventories Rose More Than Forecast (Update1)
U.S. Wholesale Inventories Rose More Than Forecast (Update1)
By Bob Willis
Feb. 8 (Bloomberg) — Inventories at U.S. wholesalers
surged in December as sales dropped by the most in almost a
year, signaling companies will need to pare stocks in coming
months.
The 1.1 percent gain was the biggest since August 2006 and
followed a 0.8 percent rise in November 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.
Sales dropped 0.7 percent, the most since January, led by
declines at auto, computer and electrical distributors. The need
to reduce inventories in coming months may lead to fewer orders
at factories, deepening a slowdown that began late last year and
contributing to an expected deceleration in economic growth.
“As consumer orders lag, you;ll see inventory drawdown,;;
Guy Lebas, chief economist at Janney Montgomery Scott LLC in
Philadelphia, said before the report. “It appears that the
production slowdown is in full swing.;;
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 3.70
percent at 10:09 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 inventories 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 increase 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
last quarter reduced stockpiles at a $3.4 billion annual pace,
led by a drop in automobiles.
The decline subtracted 1.3 percentage points from growth in
the last three months of 2007, after adding 0.9 point in the
third quarter. A 27 percent drop in production by carmakers in
the last quarter 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
