Inventories increase; sales fall


Associated Press

WASHINGTON

Inventories held by wholesalers rose for a fifth-consecutive month in May, but sales fell for the first time in more than a year, sending a cautionary signal about the strength of the recovery.

Wholesale inventories increased 0.5 percent while sales dropped 0.3 percent, the Commerce Department said Friday. It was the first decline for sales since March 2009.

The May sales decline is the latest sign that the economic recovery could be losing momentum in the second half of the year. Weakness in sales could discourage businesses from boosting their orders. That would translate into a slowdown in factory production.

Businesses helped spur the recovery by rebuilding their inventories after slashing them during the recession.

The gross domestic product expanded at a 5.6 percent rate in the final three months of last year, largely because of the swing in inventories.

The trend in inventory rebuilding continued in the first quarter of this year but at a more-modest pace. That was among the reasons growth slowed to 2.7 percent.

Mike England, an economist with Action Economics, said Friday’s wholesale inventories report has persuaded him to lower his growth estimate for the April-June quarter, to 2.8 percent from 3.3 percent.

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