US wholesale inventories surged by the largest amount in two years in July, a government report said on Friday, in a sign firms were anticipating enough demand to boost stock this summer. Inventories jumped 1.3 percent, the steepest gain since July 2008, and more than three times the 0.4 percent increase analysts had anticipated, a Commerce Department report showed.
A restocking of inventories has helped drive the economy's recovery, but analysts say slowing demand has likely left businesses with ample stocks and they expect the boost from inventories to fade in the second half of the year. A quickened pace of inventory accumulation accounted for 0.6 percentage points of the economy's 1.6 percent annual growth rate during the second quarter.
Economic data suggest the recovery may have lost steam over the summer. Friday's report showed wholesale sales rose by a larger-than-expected 0.6 percent in July, suggesting inventories may not have been gathering too much dust on shelves. But the sales rise followed declines in June and May, and analysts said sales would need to stay strong to support continued inventory building.
"In general there has been an increase in inventories at a time when the economy is slowing down," said Brian Bethune, an economist with IHS Global Insight in Lexington, Massachusetts. "Something's gotta give here. Either the economy picks up or production has to be cut."
Markets paid little attention to the report. The inventory-to-sales ratio, which measures how long it would take to clear shelves at the current sales pace, edged up to 1.16 months' worth. It was the highest since February, but was down from 1.27 months' worth a year ago.
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