Oct. 8 (Bloomberg) -- Inventories at U.S. wholesalers dropped in August for a 12th consecutive month, clearing the way for a pickup in orders as sales improve.
The 1.3 percent decrease in stockpiles was larger than anticipated and followed a revised 1.6 percent drop in July, figures from the Commerce Department showed today in Washington. Wholesale inventories have had the longest series of declines since records began in 1992. Sales climbed 1 percent, the biggest gain since June 2008.
Distributors will likely increase bookings after companies drew down inventories at a record pace in the first half of the year. The gains may give the world’s largest economy a boost in the early stages of a recovery as American factories rev up assembly lines to prevent stockpiles from dwindling even more.
“The degree of decline has been extreme and will likely slow in coming months,” said Guy LeBas, chief economist and fixed-income strategist at Janney Montgomery Scott LLC in Philadelphia. “But, we’re not looking for a sharp uptick.”
Economists forecast inventories would drop at a 1 percent annual rate after a 1.4 percent decline in July, according to the median of 38 projections in a Bloomberg News survey. Estimates ranged from declines of 1.8 percent to 0.5 percent.
Another report showed the number of Americans filling for jobless benefits last week dropped to the lowest level in 10 months, indicating the labor market is deteriorating at a slower pace as the economy emerges from the recession.
Fewer Claims
Unemployment claims dropped to 521,000 in the week ended Oct. 3, less than the median estimate of economists surveyed by Bloomberg News, from 554,000 the prior week, figures from the Labor Department showed.
Stocks rose, buoyed by the drop in jobless claims and by an unexpected profit at Alcoa Inc. to start the third-quarter earnings season. The Standard & Poor’s 500 Index was up 0.5 percent to 1,062.63 at 10:06 a.m. in New York.
The value of goods on hand at distributors stood at $381.2 billion in August, the lowest level since July 2006.
At the current sales pace, it would take 1.2 months for wholesalers to deplete the amount of goods on hand, the lowest level since September 2008. The reading was as low as 1.1 months in June 2008. A reduction in months’ supply leaves more room for companies to buy more goods, helping to support production.
Consumer spending climbed 1.3 percent in August, the most in almost eight years, the government reported last week. The increase was helped by a surge in auto demand because of the government’s “cash-for-clunkers” trade-in program, which expired Aug. 24.
Auto Stockpiles
Today’s report showed auto inventories dropped 2.3 percent as sales jumped 7.7 percent, the biggest gain since 1999. That pushed the industry’s inventory-to-sales ratio for August down to 1.57 months, the lowest level since May 2008.
Even with the expiration of the government’s auto program, total consumer spending may rise the rest of this year, though at a slower rate, according to economists surveyed last month by Bloomberg.
Today’s report showed stockpiles of durable goods, or those meant to last at least three years, decreased 1.6 percent in August, and sales increased 1.2 percent.
Stockpiles of professional equipment, such as computers, fell 1.1 percent. That brought the industry’s inventory-to-sales ration down to 1.01 months, matching July’s record low.
Inventories of non-durable goods including fuels and food fell 0.9 percent, while sales increased 0.9 percent.
Fuel Costs
Higher energy costs may have boosted the value of non- durable inventories in August. Crude oil traded on the New York Mercantile Exchange averaged $71.14 a barrel in August, compared with $64.33 a barrel in July.
Wholesalers make up about 25 percent of all business stockpiles. Factory inventories, which account for about a third of the total, fell 0.8 percent in August, the smallest drop in three months, the Commerce Department said Oct. 2. Retail stockpiles make up the rest and will be included in the Oct. 14 business inventories report.
Online shoe and apparel retailer Zappos.com Inc. is boosting inventory of its best-selling brands as it expects sales to pick up in the year-end holiday season, Fred Mossler, who oversees merchandising at the Henderson, Nevada-based company said Sept. 28 in an interview.
“We think the customer is going to come back and we want to be there to service them,” Mossler said. “We’re making some bets about some of our best products and brands.”Source bloomberg.com
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