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Inventories, sales up in June; Fed seen leaving rates alone

WASHINGTON — U.S. companies, still trying to keep up with robust sales, boosted inventories in June by a strong 0.9 percent.

The increase in stockpiles of goods on shelves and backlots nationwide was faster than the 0.6 percent that many analysts expected. That boosted the total to a seasonally adjusted $1.19 trillion, the Commerce Department reported Monday.

Stocks of oil and oil products, which saw a price spike this summer, soared 4.7 percent while drug inventories rose 3.1 percent.

June's overall increase was unchanged from the revised May figure of 0.9 percent, which earlier had been estimated at 0.8 percent -- the fastest pace in six months.

"The inventory numbers were pretty strong,'' said Joel Prakken, chairman of Macroeconomic Advisers, an economic forecasting firm in St. Louis.

At the same time, growing signs that the red-hot economy began to slow in the late spring and early summer, as evidenced last week in the Federal Reserve's latest survey of business activity around the country, are "washing out'' the effect of the inventory strength, Prakken suggested.

While the economy is in no danger of tipping into recession, the central bank's survey found slower activity in consumer spending, manufacturing and construction in June and July.

The conclusions were based on reports submitted by the Fed's 12 regional banks and intended for Fed policy-makers to use when they next meet on Aug. 22.

The portents of slower growth reinforce the expectation "that the Fed will be on the sidelines for a while,'' Prakken said.

The central bank has boosted interest rates six times over the past 14 months in an effort to slow the economy and keep inflation in check. Many economists believe the Fed will leave rates unchanged at its next meeting, preferring to wait and see whether the rate increases it has already approved will be enough to do the job.

On Wall Street, stocks were modestly higher in midday trading, with investors said to be basically on hold until the Fed meeting. The Dow Jones industrial average was up 75 points at midafternoon.

Monday's economic report showed that June sales jumped 0.9 percent to $904.2 billion, with oil and oil products, electrical goods, motor vehicles, automotive equipment and beer, wine and alcoholic beverages leading the way.

The June sales increase slowed from a 1.1 percent jump in May.

The June rise in sales left the inventory-to-sales ratio unchanged but near a record low. The ratio stood at 1.32 in June, meaning it would take 1.32 months to use up inventories at the June sales pace. The ratio, which hit a record low of 1.31 months in March, was unchanged in June from May and down from 1.34 in June 1999.

On the inventory front, retailers posted the biggest gain in June, as they had in May. They boosted inventories by 1.2 percent to $387.2 billion. In May, retailers' inventories jumped by 1.5 percent.

Despite the big increase in inventories, retailers' sales grew by a modest 0.4 percent in June to $268.5 billion. Sales inched up 0.1 percent in May.

^


On the Net:

http://www.census.gov/mtis/www/current.html





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