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Wholesale Inventories in U.S. Fell 0.2% in January
Inventories at U.S. wholesalers unexpectedly fell in January for a second month, signaling companies had difficulty keeping pace with demand.

The 0.2 percent decline in the value of stockpiles followed a revised 1 percent decrease in the prior month, the Commerce Department said today in Washington. Sales jumped 1.3 percent, the most since November, after a 1.2 percent gain.

Rising orders at companies such as Texas Instruments Inc. indicate production will keep increasing in coming months to bring inventories more in line with sales. Efforts to replenish stockpiles helped the economy expand at a 5.9 percent annual pace in the fourth quarter, the fastest in more than six years.

“This indicates that inventories are broadly in balance at the wholesale level and that the period of massive inventory liquidation is over,” said Steven Wood, president of Insight Economics LLC in Danville, California. It “should give way to a period of modest inventory accumulation.”

At the current sales pace, wholesalers had enough goods on hand to last 1.1 months, the lowest since record-keeping began in 1992 and down from 1.12 months in December. Sales have increased for 10 straight months.

Factory Inventories

Wholesalers make up about 30 percent of all business stockpiles. Factory inventories, which make up about 38 percent of the total, climbed 0.2 percent in January, the Commerce Department reported on March 4. Retail stockpiles, which make up the rest, will be included in the March 12 business inventories report.

Companies slashed stockpiles at a record pace last year when demand slumped. As sales began to revive, efforts to rebuild inventories contributed 3.88 percentage points to gross domestic product in the fourth quarter.

Recent reports suggest the replenishment of depleted stockpiles will lift production in coming months. The Institute for Supply Management’s manufacturing gauge was 56.5 in February, the seventh consecutive month of growth.

Texas Instruments, the second-largest U.S. chipmaker, said quarterly profit and sales will be at the high end of its forecasts, fueled by increasing demand for computers, high- definition TVs and cars. The Dallas-based company also projects an increase in stockpiles compared with the prior quarter.

http://www.businessweek.com/news/2010-03-10/wholesale-inventories-in-u-s-fell-0-2-in-january-update1-.html