ICS Magazine

Business Inventories Rise Unexpectedly

July 15, 2002
WASHINGTON (Reuters) - U.S. business inventories unexpectedly increased in May, posting their first rise in 16 months as sales fell, the government said on Monday.

Inventories at retailers, manufacturers and wholesalers rose 0.2 percent in May after dropping 0.2 percent a month earlier, the Commerce Department said. It was the first rise in business stocks since a matching 0.2 percent gain in January 2001. Wall Street economists had expected inventories to drop 0.1 percent.

The surprise increase came as sales slid 0.4 percent after a strong 1.7 percent gain in April. With sales off and stocks up, the inventories-to-sales ratio -- a measure of how many months it would take to sell off inventories at the current sales pace -- ticked up to 1.36 in May from 1.35 in April.

With stocks-to-sales ratios hovering near historic lows, many economists expect businesses to try to refill depleted shelves. However, a drop in sales is not the businessman's preferred method of boosting inventories.

The largest inventory increase came at the retail level. Retailer's stocks rose 1.0 percent in May as auto inventories rose 2.5 percent and stocks of furniture for sale gained 1.9 percent. Wholesale inventories edged up 0.1 percent, but manufacturing stocks dropped 0.4 percent.