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Wholesale inventories gain in May, helping to feed growth optimism

An employee operates a forklift at the distribution center of the Oregon Freeze Dry facility in Tangent, Oregon.
Leah Nash | Bloomberg | Getty Images

U.S. wholesale inventories rose in May, reinforcing the view that economic growth should surge in the second quarter following a weak first three months of the year.

The Commerce Department said on Thursday wholesale inventories increased 0.5 percent from a month earlier. The rise was just below economists' expectations for a 0.6 percent gain.

The gains were driven by increases in inventories of metals, autos, machinery and lumber.

Inventories are a key component of gross domestic product changes. The component that goes into the calculation of GDP - wholesale stocks excluding autos - increased 0.3 percent in May.

A sharp slowdown in the pace of restocking by businesses helped to sink economic growth in the first quarter, but a swing in inventories is expected in the April-June period.

The economy contracted at a 2.9 percent annual pace in the January-March period, with inventories playing a big role in the decline. Many analysts forecast growth in the second quarter to rebound to around a 3 percent pace.

Sales at wholesalers increased 0.7 percent in May. At May's sales pace it would take 1.18 months to clear shelves, which was unchanged from April.

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