AHEAD OF THE BELL

Wholesale inventories

[July 09, 2010]  WASHINGTON (AP) -- Inventories held by wholesalers likely rose for a fifth straight month in May while sales are expected to post another gain as well.

Economists surveyed by Thomson Reuters expect wholesale inventories rose 0.4 percent in May and they are looking for a similar 0.4 percent increase in sales. The Commerce Department will release the report at 10 a.m. EDT Friday.

The gains in sales and inventories would be encouraging signs that the economic recovery can be sustained. The hope is that a steady rise in demand will prompt businesses to step up orders and restock depleted store shelves. That would give a boost to factories and prompt them to increase hiring.

Wholesale inventories rose 0.4 percent in April, while sales were up a strong 0.7 percent during that month, marking the 13th consecutive increase in sales.

Inventories at the wholesale level have fallen for 13 consecutive months through last September. Businesses went through a massive liquidation of their stocks in a struggle to contain costs during the recession.

The move from slashing inventories to restocking has played an important role in supporting growth in the past two quarters. A rise in factory orders has helped make manufacturing one of the standout performers for the recovery so far.

The overall economy, as measured by the gross domestic product, grew at an annual rate of 5.6 percent in the final three months of last year, a surge powered by a swing in business inventories.

GDP growth slowed to a rate of 2.7 percent in the first quarter of this year with inventories continuing to be a positive support for the economy.

[Associated Press]

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