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US wholesale inventories rise 0.5 percent in May

H.S. Borji
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US wholesale inventories advanced steadily in May, supporting expectations for stronger second quarter growth figures.

Wholesale inventories rose 0.5 percent to $532.7 billion in May, following a revised gain of 1 percent the prior month, the Commerce Department reported today in Washington. Economists forecast a monthly gain of 0.6 percent.

Compared to May 2013, wholesale inventories were up 7.9 percent.

Wholesale inventories measure how much US wholesale businesses adjusted stockpiles and are a key component of gross domestic product. Faster restocking at wholesalers boosts economic growth because it reflects stronger demand for factory goods, which leads to greater manufacturing output.

May durable goods inventories increase 1 percent and were up 8.5 percent from a year ago.

Inventories of nondurable goods declined 0.3 percent from April, but advanced 6.9 percent from a year earlier.

Inventories of metals and minerals excluding petroleum advanced 2.1 percent from the previous month, official data showed.

Inventories of petroleum products were up 2 percent.

Sales at wholesalers increased 0.7 percent to $453.2 billion in May. Wholesale sales were up 6.6 percent from the May 2013 level. At the current sales pace, it would take 1.18 months for wholesalers to clear existing inventory.

Today’s figures support the view the US economy was accelerating at a steady pace in the second quarter, rebounding from a disastrous first quarter that saw GDP contract 2.9 percent annually. Inclement weather weighed on economic activity in the first three months of the year, slowing the pace of restocking and personal consumption expenditures.

The first quarter slowdown prompted the Federal Reserve to downgrade its growth outlook for 2014 from nearly 3 percent to between 2.1 percent and 2.3 percent.

Economists say the first quarter slowdown was only temporary. Early estimates of second quarter GDP growth range from 3 percent to 4 percent annually. However, disappointing May durable goods orders have raised some concern growth may not be as robust as initially estimated.

Orders for manufactured goods meant to last three years or more declined 1 percent in May, the Commerce Department reported last month.

Non-defense capital goods excluding aircraft – a key measure of business spending – increased 0.7 percent.

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