July 14, 2011 / 2:16 PM / in 7 years

Business inventories rise in May as sales slip

WASHINGTON (Reuters) - Business inventories rose more than expected in May as sales recorded their first decline in almost a year, a government report showed on Thursday.

The Commerce Department said inventories increased 1.0 percent to $1.51 trillion, the highest level since October 2008, after rising by an upwardly revised 1.0 percent in April.

Economists polled by Reuters had forecast inventories rising 0.8 percent after a previously reported 0.8 percent increase in April.

Inventories are a key component of gross domestic product changes and May’s rise suggested restocking would give second-quarter GDP growth a lift.

But the increase, which came as business sales dipped 0.1 percent - the biggest fall since last June — was also confirmation of the sluggish demand that is helping to constrain growth. Sales edged up 0.1 percent in April.

May’s weak sales pace raised the inventory-to-sales-ratio — which measures how long it would take to clear shelves at the current sales pace - to 1.28 months from 1.27 months in April.

Reporting by Lucia Mutikani, Editing by Chizu Nomiyama

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