Wholesale inventories in the U.S. unexpectedly decreased in the month of May, according to a report released by the Commerce Department on Wednesday, although the report also showed a significant increase in wholesale sales for the month.
The Commerce Department said wholesale inventories fell by 0.5 percent in May following a revised 0.1 percent decrease in April.
The drop surprised economists, who had been expecting inventories to rise by 0.3 percent compared to the 0.2 percent increase originally reported for the previous month.
The unexpected decrease in wholesale inventories was partly due to a 0.3 percent drop in inventories of durable goods, which reflected a 1.7 percent decrease in inventories of metals and minerals, except petroleum.
Inventories of non-durable goods also fell by 0.8 percent in May amid a 6.0 percent drop in inventories of farm product raw materials.
Peter Boockvar of Morgan Stanley said, "Bottom line, if matched by a drop in business inventories, Q2 GDP estimates will have to be lowered again with the current consensus before a cut being just 1.7% after a 1.8% rise in Q1."
"This said, lean inventories create a good backdrop for an eventual build but there has to be some visibility on end demand in order to generate the added investments," he added.
Meanwhile, the report also showed that wholesale sales surged up by 1.6 percent in May following a revised 0.7 percent increase in April.
Sales of non-durable goods jumped 2.8 percent amid substantial increases in sales of apparel, piece goods, and notions and grocery and related products.
The Commerce Department said sales of durable goods showed a more modest 0.3 percent increase, as a jump in sales of motor vehicles, parts and supplies was partly offset by a notable drop in sales metals and minerals, except petroleum.
With sales rising and inventories falling, the wholesale inventories/sales ratio dropped to 1.18 in May from 1.21 in April. The decrease pulled the ratio down to its lowest level since April of 2012.
by RTT Staff Writer
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