Washington, July 15--Businesses increased their stockpiles in May, but the inventory growth failed to keep pace with steadily rising demand.
Inventories rose 0.4% to a seasonally adjusted $1.219 trillion, after a revised 0.7% advance in April, the Commerce Department said Thursday. April inventories were initially seen rising 0.5%. Forecasters had projected an advance of 0.5%.
Inventories have been on the rise this year -- but so has demand. Year over year, inventories climbed by 4.0% from May 2003 to May 2004, with business sales up 12.3%. The inventory-to-sales ratio remains at a historic low level. Businesses have been cautious about increasing stockpiles and quick to slow output when demand eases, some analysts say.
The report Thursday showed business sales rose 0.7% in May, after easing an unrevised 0.1% the previous month. The inventory-to-sales ratio held at 1.30. The ratio, an indicator of how well firms are matching supply with demand, measures how long it would take in months for a firm to sell all of its current inventory.
Retail inventories were flat in May, after rising 1.3% the month before. Auto inventories fell 1.2%. Excluding the auto component, retail inventories would have gone up 0.6%.
General merchandise stores were flat. Food store inventories rose 1.1%, and stockpiles at furniture stores climbed by 1.2%. Inventories at building materials, garden equipment and supplies stores advanced 1.7%. There was a 0.7% increase in clothing inventories.
May wholesale inventories shot up by 1.2% and factory inventories rose 0.5%. The Commerce Department already released that information in separate reports this month.
