The latest wholesale trade figures from the U.S. Commerce Department say stockpiles are down, suggesting that economic growth might pick up later this year as companies order more goods to replenish empty shelf space.
May inventories of merchant wholesalers were down 0.5 percent from the adjusted April figure to $500.9 billion, the biggest month-to-month drop since October 2011. Sales increased 1.6 percent in May compared to 0.7 percent in April.
The reduction in wholesale stockpiles could mean two things: Either demand was higher than wholesalers expected as they planned their production in the near term or wholesalers pulled back on production expecting demand to be weaker. In either case, the number suggests third-quarter productivity is likely to increase as factories boost output to replenish depleted stock.
May’s inventory-to-sales ratio was 1.18 percent, down from April's 1.21 percent and down fractionally from the May 2012 level. When the number is higher, it means wholesale stock is larger than the demand for the goods, suggesting economic sluggishness. During the 2008-2009 recession, this ratio approached 1.5.
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