Well-Stocked Shelves Keep Wholesale Inventories High
BY Matt Quinn
July 12, 2004 -- Wholesale inventories in the United States surged 1.2 percent in May thanks to a 1.5 percent jump in durable good stockpiles.
The strong numbers come after a tepid 0.2 percent rise in wholesale inventories in April. Total inventories are up 5.6 percent compared to the same period last year.
Wholesale sales rose a more moderate 0.5 percent compared to a revised April reading of 0.9 percent. Sales have ballooned 16.1 percent from a year ago.
The numbers come as good news in light of the recent disappointing employment numbers and last week's manufacturing reading. The increase in inventories suggests that businesses are still experiencing strong demand and in turn are keeping shelves well stocked.
The fact that sales growth is outpacing inventory buildup suggests that companies are slow in keeping up with demand. The inventory-to-sales ratio, which is the number of months it would take for a business to run through its inventory, was 1.13 in May, a slight uptick from April's 1.12 reading, but way down from May 2003's 1.24.
MATT QUINN contributes to the Wall Street Journal's corporate finance blog. He has also written extensively about banking and corporate finance for publications including Inc., American Banker, and Financial Week. He lives in Brooklyn, New York.