U.S. Business Inventories Unchanged In May, Business Sales Surge

By BridgeNews Despite a rebound in sales, inventories at U.S. businesses failed to decline in May, the Commerce Dept. reported July 16. One of the causes of the current economic slowdown has been a buildup of inventories as demand has slowed. Many economists believe the economy will grow faster once stockpiles are brought back into balance with demand, but they don't expect a quick turnaround. Cary Leahey, senior economist at Deutsche Bank, says the data suggest that the inventory correction in the first half of the year will drag on into the third quarter. Business sales rose 1.1%, the first increase since December and the steepest since March 2000. The inventory-to-sales ratio slipped to 1.42, the lowest since December, from 1.44 in April. Inventories at retailers rose 0.4%. In the retail sector, automotive stocks rose 0.5%, after having been reported down a revised 0.1% in April. The retail inventory figure provides the final snapshot of U.S. inventories for the month. Commerce has previously reported that factory inventories fell 0.3% while wholesale inventories climbed 0.2%. Kevin Logan, a senior economist at Dresdner Kleinwort Wasserstein, says the data showed inventories represented less of a drag on second-quarter gross domestic product than expected. The economy grew at an annual rate of 1.2% in the first quarter, and is unlikely to accelerate in the second quarter.

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