US wholesale inventories up, sales post largest drop since 2009

Washington: US wholesale inventories unexpectedly rose in January as sales recorded their biggest decline since 2009, pushing the number of months it would take to clear warehouses to its highest level in more than five-and-a-half years.

The Commerce Department said on Tuesday wholesale inventories increased 0.3 per cent. Stocks at wholesalers were revised to show them unchanged in December.

Economists polled by Reuters had forecast wholesale inventories unchanged in January after December’s previously reported 0.1 per cent gain.

Sales at wholesalers fell 3.1 per cent in January, the largest drop since March 2009, after slipping 0.9 per cent in December.

At January’s sales pace it would take 1.27 months to clear shelves, the most since July 2009, up from 1.22 months in December.

Inventories are a key component of gross domestic product changes. The high inventory-to-sales ratio suggests wholesalers have little incentive to stock their warehouses, which could weigh on first-quarter GDP growth.

The component of wholesale inventories that goes into the calculation of GDP — wholesale stocks excluding autos — rose 0.2 per cent.

The report came on the heels of data last week showing inventories at manufacturers fell 0.4 per cent in January, the/ssecond straight month of decline.

That combined with weak January construction spending and export growth, and softer February automobile sales prompted economists to slash their first-quarter growth estimates by as much as six-tenths of a percentage point to as low as a 1.5 per cent annualised pace.

As of Monday, the Atlanta Federal Reserve’s model was/sforecasting a 1.2 per cent growth pace for the January-March period. The economy expanded at a 2.2 per cent rate in the fourth quarter, largely held back by a slow inventory build and a large trade deficit.

Harsh weather, slower global demand and the now-settled labour dispute at the country’s West Coast ports have constrained economic activity early in 2015.

The cooling in activity is seen temporary and a consumer spending-driven rebound is anticipated in the second quarter.