Wholesale Inventories Jump to 2-Year High

(AP)  Inventories held by wholesalers surged in July by the largest amount in two years while sales rebounded after two straight declines.

The Commerce Department said Friday that wholesale inventories rose 1.3 percent in July, the best performance since July 2008 and triple the increase economists had expected. Sales at the wholesale level increased 0.6 percent, double what had been expected and the best showing since April.

Businesses restocking depleted store shelves has been a major driver of the economy since late last year and the strong gain seen in July should help alleviate fears that the country could be in danger of slipping into another recession.

The overall economy, as measured by the gross domestic product, slowed to an annual growth rate of just 1.6 percent in the April-to-June quarter, down from GDP growth of 3.7 percent in the first quarter. That slowdown has raised concerns about the durability of the recovery from the nation's worst recession since the Great Depression.

Reports this week have eased those fears somewhat. In addition to the new report on inventories, the government said Thursday that new applications for jobless benefits fell last week to the lowest level in two months. Also on Thursday, the government said the U.S. trade deficit narrowed in July as exports rose to the highest level in nearly two years, an indication that American manufacturers are still benefiting from rising global demand.

U.S. businesses have helped spur the recovery by rebuilding their inventories after slashing them during the recession to cut costs.

When businesses began building up inventories at the end of last year, that boosted orders to U.S. factories and helped spur overall economic growth. Inventories held by wholesalers were cut for 13 consecutive months starting in September 2008.

The July increase marked the seventh consecutive rise in inventories and followed a 0.3 percent inventory increase in stockpiles in June.

The rise in sales and an even bigger increase in inventories left the ratio of inventories to sales at 1.16 in July. That means it would take 1.16 months to deplete inventories at the July sales pace. That was up slightly from a ratio of 1.15 in June.