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Wholesale inventories up in June but sales drop

8/10/10

WASHINGTON (AP) — Inventories at the wholesale level edged up slightly in June but sales fell by the largest amount in 15 months.

Wholesale inventories rose 0.1 percent in June, the Commerce Department reported Tuesday. Sales fell 0.7 percent. It marked the second straight drop in sales, providing further evidence that the economy was slowing in the spring.

Businesses helped drive the early stages of the recovery last year by building up their stocks after slashing them during the recession. The worry is that if consumer demand falters, business could cut back on their inventory restocking. That could deal a blow to manufacturing production, which has been one of the strongest sectors during the economic recovery.

The government reported that the overall economy, as measured by the gross domestic product, slowed significantly in the April-to-June quarter. GDP rose just 2.4 percent, down from 3.7 percent growth in the first quarter and 5 percent GDP growth in the final three months of 2009.

Businesses have helped drive economic growth by building up their stocks. But that strength has started to fade.

The 0.7 percent drop sales at the wholesale level in June was much weaker than economists had forecast. They were looking for sales to rise by 0.5 percent. And the government revised the May figure to show a sales drop of 0.5 percent, larger than the 0.3 percent decline originally reported.

The 0.1 percent increase in inventories was smaller than the 0.4 percent increase analysts had expected. The June advance followed a 0.5 percent May increase in inventories.

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