Ahead of the Bell: US wholesale inventories

Associated Press

WASHINGTON (AP) — U.S. wholesale businesses likely saw an increase in demand for their products in September, a gain that should have spurred further building of their stockpiles.

The Commerce Department is scheduled to report how much wholesale businesses restocked in September. The report will be released at 10 a.m. EST Friday.

In August, stockpiles grew 0.5 percent after a 0.6 percent rise in July. Sales at the wholesale level rose 0.9 percent in August, the biggest one-month gain since February. The increase in stockpiles ended three months of declines.

Total wholesale inventories stood at $487.5 billion. That's 26.9 percent higher than the post-recession low hit in September 2009.

Companies typically boost their stockpiles when they anticipate sales will rise in coming months. Faster restocking helps drive economic growth. When businesses order more goods, it generally leads to more factory production.

The overall economy grew at an annual rate of 2 percent in the July-September quarter, up from growth of 1.3 percent in the April-June quarter.

Changes in inventories subtracted 0.1 percentage point from growth in the third quarter. But that reflected a big drawdown in farm inventories because of the drought. Without the decline in farm inventories, overall inventories would have added to growth because of strength in business stockpiling.

Economic growth slowed in the spring, in part because high unemployment and low pay increases kept U.S. consumers from spending more freely. Weaker global growth has also dampened demand for U.S. exports.

A stronger job market could help boost growth in the final three months of the year. When more people find jobs, consumer spending typically increases. Consumer spending accounts for nearly 70 percent of economic activity.

The government reported last week that employers added 171,000 jobs in October and hiring was stronger in August and September than first thought. Job growth at that pace was an indication that the economy is strengthening but at a slow pace.