Washington, DC, December 11, 2006--Inventories at wholesalers rose to their highest level in relation to sales in three years in October, the Commerce Department reported Monday.
Sales at wholesalers fell 0.5% in October, the second decline in a row after sales fell a revised 1.5% in September, which was the fastest drop in three years. Inventories rose 0.8% in October after gaining 0.7% in September.
The inventory-to-sales ratio rose to 1.20 in October from 1.18 in September. The last time the ratio was bigger was in November 2003. The inventory-sales ratio stood at a record low 1.15 in May, June and July. The typical wholesaler has about 37 days of sales on hand, up from 35 days in July.
The buildup in inventories, if sustained throughout the pipeline running from production to final sales, could lead to cutbacks in output and employment.
Wholesale inventories are up 10.1% in the past year. Wholesale sales are up 5.9% in the past year. The figures are not adjusted for price changes.
The inventory-to-sales ratio for durable goods rose to 1.55, the highest since May 2003, as sales fell 0.4% and inventories rose 0.7%. Automotive inventories rose 0.9%, while auto sales rose 2.5%. Inventories are building up for machinery and hardware.
The inventory-to-sales ratio for nondurable goods rose to 0.86, the highest since August 2005. Sales of nondurable goods fell 0.6%, as petroleum sales dropped 5.1% on falling prices. Inventories of nondurable goods rose 0.9%, including a 23% rise in inventories of farm products. The figures are seasonally adjusted.
