Inventory, sales up at wholesale businesses

Wholesale businesses increased their stockpiles of autos, computer equipment and heavy machinery in August, boosting inventories for a 20th straight month as their sales rose at the fastest pace in five months. The combination of rising sales and inventories should be a good sign for future factory output. The Commerce Department reported today that wholesale inventories rose 0.4% in August after a 0.8% July gain. Sales were up 1%, the best showing since a 3% rise in March. The stronger sales gain was an encouraging sign, moderating concerns about whether the economy could be in danger of toppling into another recession. Economists expect overall economic growth to post a modest rebound in the second half of this year. The August inventory gain pushed stockpiles to a seasonally adjusted level of $464.3 billion, up 21% from a September 2009 low of $383.6 billion. Companies were slashing inventories during the recession as they tried to control costs in the face of falling demand. The shift to rebuilding inventories has been a major factor supporting growth over the past two years. The overall economy grew at an anemic rate of just 0.9% from January through March, the weakest performance since the recession ended in June 2009. Economists expect growth will show a slight improvement, of around 2%, in the last half of this year—still too weak to make a significant improvement in the unemployment rate, which the Department of Labor today reported remains stuck at 9.1% for the third consecutive month.