Inventories of unsold goods at U.S. wholesalers rose 0.5% in May, boosted by a buildup in a range of goods including automobiles, metals and electrical supplies, government data showed Tuesday.
At the same time, separate data showed weak retail sales as consumers cut back on spending amid higher gasoline prices and continued troubles in the housing market.
The value of inventories rose to $396.66 billion after a 0.3% gain in April, the Commerce Department said.
Economists polled by Reuters were expecting a 0.4% rise in inventories in May.
Sales by wholesalers rose 1.3% to $357.17 billion in May following a 1.5% gain in April.
U.S. treasuries showed little reaction after release of the wholesale inventories report as traders were awaiting a speech later by Federal Reserve Chairman Ben Bernanke. Before release of the report, however, U.S. treasuries rallied amid mounting concerns over subprime mortgage debt and the deteriorating housing market.
In the Commerce report, the inventory-to-sales ratio - which measures how long it would take to sell off stocks of goods at the current pace - fell to a record low of 1.11 months' worth from 1.12 months' in April.
While wholesalers boosted their inventories, two separate reports on July underscored recent softness in U.S. retail sales.
RETAIL SALES WEAKEN
Redbook Research said same-store sales were up only 0.8% from a year ago in the week ended July 7, the last week in retailers' fiscal month of June and the worst performance in months.
Last week's rise marked a slowdown from 1.2% gain from the previous week.
Another report from the International Council of Shopping Centers and UBS Securities showed chain stores sales rose 2.4% over the past year for the week ended July 7.
That was down slightly from a year-over-year gain of 2.5% the previous week.
"Sales were below plan in the final week of June, making for a disappointing, though not particularly surprising end to an underperforming month," Redbook Research said.
U.S. retailers will report on June same-store sales results on Thursday and the government will issue its closely watched gauge of June retail sales Friday.
Wall Street economists expect the government measure to show sales gained only 0.1% last month.