U.S. Sales Improve In May

Indicators Point To Uptick In Orders And Production

Sales EconomyA Commerce Department report showed inventories at U.S. wholesalers declined in May as sales increased, pointing to an approaching uptick in orders and production, analysts say. The report showed that at the current sales pace, wholesalers had enough goods on hand to last 1.18 months, the fewest since April 2012.

The Commerce Department said Wednesday that wholesale stockpiles shrank 0.5% in May, the most in 20 months. Sales, though, at the wholesale level jumped 1.6%, the most since November. In addition to a rise in sales, much of the recent economic data suggests the second half of 2013 could be stronger, helped by steady job growth, a resilient consumer and a sustained recovery in housing.

"I am cautiously optimistic that the economy will continue to slowly improve," said David Woods, president and CEO of Counselor Top 40 distributor AIA Corporation (asi/109480). "Housing has firmed up nicely. We are seeing good, steady job growth. Our sales have been good. We had a good first half and are expecting a solid second half."

Millan Mulraine, director of U.S. rates research at TD Securities USA LLC in New York, notes that the second quarter is ending on fairly strong footing. "With the drawdown in inventories, if the pace of sales is maintained, we'll see a pickup in production," Mulraine told Bloomberg. He expects demand to be sustained as the effect of a higher payroll tax abates, consumer confidence improves and the labor market strengthens.