Companies restocked warehouse shelves in April. A sign of rising sales?
U.S. wholesalers stocked up in April by the most in almost a year, perhaps a sign they expect sales to increase accelerate in the summer after a weak first quarter.
Wholesale inventories jumped 0.6% in April to mark the biggest increase since June 2015, the Commerce Department said Thursday. The buildup in inventories suggests companies increased production early in the second quarter, a move that would boost gross domestic product.
Perhaps more important, wholesale sales were even stronger. They rose 1% in April — the biggest advance in a year.
As a result, the inventory-to-sales ratio dipped to 1.35 from 1.36. In a good sign, it’s now fallen two months in a row after hitting a post-recession peak. A high level of inventories is typically a sign that companies either produced too many goods or failed to anticipate a slowdown in sales.
A falling ratio implies that companies have gotten a better handle on inventories or the sales are picking up, both of which are positives for the economy.