U.S. Wholesale Inventories and Sales Fell in March
Inventories at U.S. wholesalers fell in March for the seventh straight month after a record drop in February, as distributors focused on eliminating excess supply from their shelves.
The 1.6 percent decline in stockpiles followed a revised 1.7 percent decrease in February that was bigger than previously estimated, the Commerce Department said today in Washington. Still, sales plunged 2.4 percent to the lowest level since 2005.
Companies are cutting back production and spending to winnow stockpiles built up as a result of reduced demand both in the U.S. and abroad. The economy shrank 6.1 percent in the first quarter, reflecting a record slump in inventories that may set the stage for a return to growth later this year.
The glut of unsold goods “will be less of a drag” on the economy as the year progresses, said Scott Anderson, senior economist at Wells Fargo & Co. in Minneapolis. Even so, “we still have more work to do to work down inventories.”
At the current sales pace, it would take 1.32 months for distributors to deplete the amount of goods on hand, compared with 1.31 months in February.
Inventories at wholesalers were forecast to drop 1 percent after an initially reported 1.5 percent decrease in February, according to the median estimate of 28 economists surveyed by Bloomberg News. Projections ranged from a decline of 1.8 percent to an increase of 1 percent.
Job Losses
Separately today, the Labor Department said payrolls fell by a less-than-forecast 539,000 in April, as hiring for the next census boosted government staffing. The unemployment rate rose to a 25-year high of 8.9 percent.
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 March, Commerce reported May 1. Retail stockpiles, which make up the rest, will be included in the May 13 business inventories report.
Inventories shrank by a record $103.7 billion annual rate in the first quarter, representing the biggest drag on the economy during the three-month period cash advance in one hour.
More recent data have shown inventories contracting at a slower pace. The Institute for Supply Management’s manufacturing stockpiles gauge increased to 33.6 last month, from 32.2 in March. Readings below 50 signal contraction.
Dow Chemical Co., the largest U.S. chemical maker, said April 30 that global demand has improved each month since December and customers have now used up their stockpiles, sending shares up the most in at least 28 years in New York.
Recession ‘Moderating’
“There are some signs that the pace of global economic decline is moderating,” Dow’s Chief Executive Officer Andrew Liveris said in a statement. “It’s prudent to expect that 2009 will still be a recessionary year globally, and we are not counting on material improvements in economic conditions in the near term.”
Today’s report showed stockpiles of durable goods, or those meant to last at least three years, fell 2.4 percent in March, after a 2.6 percent decline in February. Durable sales fell 3.3 percent.
Stockpiles of non-durable goods such as fuels and grains dipped 0.3 percent. Sales of such items decreased 1.6 percent, with a 5.1 percent drop in petroleum sales.
Waning demand for petroleum-based fuels pushed up inventories of unused crude to an 18-year high last month and may inflate that component of the wholesale stockpiles report in coming months. Crude oil held in storage tanks around the U.S., the world’s largest energy market, swelled by 52 million barrels since the start of 2009, enough to supply every refinery on the West Coast for almost 3 weeks, Energy Department data showed.
Exxon Mobil Corp., the world’s largest refiner, said April 30 that first-quarter profit fell for the first time since 2004 after the global recession sapped energy demand, pulling down oil and gasoline prices.
Filed under: economics by Finance Boss