Inventories of goods at U.S. wholesalers unexpectedly fell 0.2 percent in May, the second decline this year – and a sign that businesses underestimated a recent rebound in consumer spending.
“We’ve gone through a substantial inventory correction, and overall, we’re in a much better balance between inventories and sales,” said Scott Brown, an economist at Raymond James & Associates in St. Petersburg.
The decline in wholesale inventories in May follows a revised 1.2 percent increase in April, Commerce Department figures showed Tuesday. Initially, the government reported on June 7 that inventories increased 1.3 percent during April.
Wholesale sales, meanwhile, showed no change in May after rising 1.1 percent during April.
“Inventory investment is still subdued,” said Carl Palash, chief economist at MCM MoneyWatch in New York. “There’s certainly no sign of it ballooning.”
Wholesalers’ inventories of big-ticket items such as furniture, lumber and electrical products accounted for much of the decline in May. Wholesale auto inventories showed no change from a month earlier. However, inventories of non-durable goods such as groceries and beer increased.
The Commerce Department also reported that the wholesale stock-to-sales ratio, which measures the number of months goods sit at wholesalers, held steady at 1.31 during May.
Financial markets ignored the report. The Treasury’s benchmark 30-year bond, little changed most of the day, advanced after the Treasury sold $10 billion in 10-year notes at an average yield of 7.016 percent. Bidding was healthy.
Government bonds climbed 13/32, pushing the yield down almost 4 basis points to 7.14 percent. Stocks were also higher with the Dow Jones industrial average rising 31.03 to 5,581.86 amid hopes of strong corporate profits.
