US wholesale stockpiles rose 0.9 per cent in June; sales edge up slight 0.1 per cent

WASHINGTON – U.S. wholesalers increased their stockpiles in June by the largest amount in more than a year, while sales crept up slightly.

The Commerce Department said Tuesday that wholesale stockpiles rose 0.9 per cent, the largest monthly gain since April 2014. Sales increased 0.1 per cent in June yet have dropped 3.8 per cent over the past year largely because of cheaper oil prices.

The rising inventory levels in June possibly suggest that businesses are more confident about an increase in consumer spending and economic growth. But if sales fail to grow at the same pace as inventories, then the excess supplies could force companies to cut orders and dampen overall growth.

The June rise in stockpiles left inventories at the wholesale level at a seasonally adjusted $586 billion, 5.4 per cent above a year ago.

Many economists expect stockpile levels to continue increasing as consumer demand improves and the precipitous drop in oil prices, which began in the middle of last year, has settled at slightly less than $50 a barrel. Wholesale inventories of petroleum have fallen 18.2 per cent in the past 12 months.

But that increase in inventories must be matched by a similarly large rise in sales that has yet to occur.

The U.S. economy has endured a sluggish, six-year recovery from the Great Recession. During the first half of 2015, the economy grew at a modest annual rate of 1.5 per cent, slightly less than the 2 per cent average during the previous five years.

Economists say that growth should accelerate through the end of the year. But these forecasts depend on a strong job market boosting consumer spending. Last week, the government reported that payrolls increased a solid 215,000 in July. The steady gains suggest that employers expect the economy to continue expanding.

The solid job growth has led many analysts to say that the Federal Reserve will begin raising a key interest rate as early as September, the first increase in nearly a decade.