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Wholesale inventories rise, but sales drop sharply

U.S. wholesale inventories rose more than expected in January, as companies built up stocks of autos and machinery, though sales posted their largest decline in nearly five years.

The Commerce Department said on Tuesday wholesale inventories rose 0.6 percent to $521.2 billion after a revised 0.4 percent gain in December.

Economists polled by Reuters expected stocks of unsold goods at wholesalers to rise 0.4 percent in January.

Inventories are a key component of gross domestic product, and strength in that category added 0.42 percentage points to the economy's annual growth pace in the fourth quarter.

Excluding autos, wholesale inventories rose 0.4 percent in January. This component goes into the calculation of GDP.

Economists believe the current inventory level is unsustainable and expect the build-up in unsold stocks to eventually reverse.

The value of automotive stocks rose 2.2 percent in the first month of the year, while machinery stocks were up 1.3 percent.

Sales at wholesalers fell 1.9 percent in January, their biggest drop since March 2009, compared to a revised 0.1 percent increase the prior month. Economists had forecast sales to edge up 0.2 percent.

Sales of non-durable equipment such as petroleum and paper products dropped 3.2 percent, the sharpest fall since December 2008.

At January's sales pace it would take 1.2 months to clear shelves, compared to December's pace of 1.18 months.

—Reuters

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