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Wholesale inventories up 0.4% in April, versus expectations for 0.2% gain

U.S. wholesale inventories rose more than expected in April as stabilizing oil prices helped lift sales by the most in more than a year, giving wholesalers an incentive to accumulate more stocks. (Tweet This)

The Commerce Department said on Tuesday wholesale inventories increased 0.4 percent. Stocks at wholesalers were revised to show a 0.2 percent rise in March instead of the previously reported 0.1 percent gain.

Economists polled by Reuters had forecast wholesale inventories rising 0.2 percent in April.

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Inventories are a key component of gross domestic product changes. The component of wholesale inventories that goes into the calculation of GDP—wholesale stocks excluding autos—rose 0.2 percent, suggesting inventories will probably be a modest boost to growth in the second quarter.

Sales at wholesalers surged 1.6 percent in April, the largest rise since March of last year. Sales had been weak since last August, in part due to the negative impact of lower oil prices on the value of petroleum goods sales.

That had led to an accumulation of inventory, leaving wholesalers with little appetite to buy more merchandise.

At April's sales pace it would take 1.29 months to clear shelves, down from 1.30 months in March.

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An inventory-to-sales ratio that high usually means an unwanted inventory build-up, which would require businesses to liquidate stocks.

That would weigh on manufacturing and economic growth.

Some economists, however, caution against reading too much into the elevated inventory-to-sales ratio, given the role that oil prices have played in depressing the value of petroleum goods sales.

Still, they expect an inventory drawdown in the quarters ahead, which is one of the reasons for less upbeat second-quarter GDP growth estimates. Inventories added a third of a percentage point to first-quarter GDP. Petroleum sales jumped 4.9 percent in April.