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DATA SNAP: US Wholesale Inventories Unexpectedly Surge

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Wholesalers' Report               !                      ! 
                    Nov      Oct  ! Inventories:         ! 
 Inventories:     +1.5%    +0.6%r ! Consensus:    -0.3%  ! 
 Sales:           +3.3%    +1.4%r ! Actual:       +1.5%  ! 
========================================================== 
 
   By Jeff Bater 
   Of DOW JONES NEWSWIRES 
 

WASHINGTON -(Dow Jones)- U.S. wholesale inventories unexpectedly surged in November and rose by the most in five years, a sign of confidence among companies in the economic recovery.

Inventories rose 1.5% to $386.26 billion, the Commerce Department said Friday. Wall Street expected a 0.3% decline. The increase, coming even as sales leaped, was the largest since a 1.5% climb in October 2004.

Farm products and petroleum inventories were responsible for some of the increase. Still, inventories in other categories rose.

It was the second straight increase in wholesale inventories; October stockpiles climbed 0.6%, revised from an originally reported 0.3%.

The report was a positive, following earlier government data showing U.S. job losses were higher than expected. The back-to-back increases in wholesale inventories suggest companies will begin stockpiling again, boosting orders and production.

Companies slashed stockpiles furiously in the first nine months of 2009, setting themselves up for increased spending and production as demand stabilizes. The improvements would help feed the economy's expansion.

Lean stockpiles are a reason some factories are growing. This week, the Institute for Supply Management said its index of U.S. manufacturing activity rose to 55.9, from 53.6 in November. The above-50 reading signaled the manufacturing sector expanded a fifth straight month. New orders for goods surged and inventories fell, the ISM report said.

Friday's wholesalers' report said sales of wholesalers rose 3.3% to $337.40 billion in November. October sales rose 1.4%, revised from an originally reported 1.2%.

At the current sales pace, it would take 1.14 months for wholesalers to deplete the amount of goods on hand, the data said. A reduction in months' supply gives companies room to buy more goods, helping support production. This inventory-to-sales ratio has been sliding all year; it was 1.29 in November 2008. The 1.14 is the lowest since 1.13 in July 2008.

Among industries, there were increases and decreases in stockpiles during November.

Wholesalers' inventories of durable goods - meant to last three or more years - decreased 0.3%, after dipping 0.1% in October. Declines in furniture and machinery offset an increase in computer equipment.

Durable goods sales rose by 1.9% in November.

Non-durable goods inventories increased 4.2%. Farm products jumped 29.8% and petroleum rose 7.0%; rising commodity prices elevated the value of stockpiles in those two categories.

Non-durable goods sales rose by 4.4%.

Wholesalers make up about 30% of all business stockpiles. Factories account for about 38%; government data this week said manufacturers' inventories rose 0.2% in November.

Retail inventories make up the rest of all business stockpiles.

Retailers approached the holidays with much less inventory. A report Thursday showed they enjoyed improvements in December same-store sales compared to a year before - a 2.8% increase posted by 32 retailers tracked by the International Council of Shopping Centers. That was the best monthly advance since April 2008. The merry holiday shopping results prompted some chains to raise fourth-quarter profit outlooks.

 
   -By Jeff Bater, Dow Jones Newswires; 202-862-9249; jeff.bater@dowjones.com 
 

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(END) Dow Jones Newswires

January 08, 2010 10:15 ET (15:15 GMT)


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