U.S. wholesale stocks rise in April, but supply constraints

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WASHINGTON, June 9 : U.S. wholesale stocks increased in April as businesses replenished stocks to meet pent-up demand, but supply constraints could make it harder to maintain the current pace of inventory rebuilding.

On Wednesday, the Commerce Department said that their wholesale inventories climbed 0.8% as estimates of last month. The stocks of wholesalers increased 1.2% in March. Wholesale inventories increased from a year earlier 5.2% in April.

Inventories are a key part of the gross domestic product. Economists polled by Reuters hoped that the April increase in wholesale inventories would be unsold.

There are downside risks for the inventory build, explained Moody's Analytics in West Chester, Pennsylvania, an economist. Supply chain disruptions could become an even bigger problem, breaking the producers' ability to restock depleted stocks even more.

Manufacturers are battling shortages of raw materials and labor in the wake of a massive demand unleashed by the reopening of the economy as CoVID 19's intensity is managed by vaccinations. The supply constraints are underscored by a global semiconductor shortage which is undercutting motor vehicle production as well as the production of electrical equipment, appliances and components, driving prices and hurting sales of these goods.

The component of the gross domestic product that goes into the calculation of wholesale inventories, also decreased 0.8%. Economists maintained their lofty second quarter GDP growth estimates, mostly at the double-digit zone, but cautioned that bottlenecks in the supply chain posed a downside risk.

Although the yearly inventories of motor vehicles rose in April, they were down 3.3% on a wholesale basis. Computer equipment stocks fell 11% in April.

In the first quarter, after a major domestic demand boom, corporations ran down inventories. The stock halt subtracted last quarter from GDP growth by nearly three percentage points. Still, the economy expanded at a robust 6.4% annualized rate after a 4.3% volume increase in the fourth quarter.

In April, the sales of wholesalers rose into 4.3% after accelerating in March. At the March sales pace, it would take wholesalers 1.22 months to clear shelves in April, unchanged from March. That is the shortest period since September 2014 since then, and that is the shortest period of time available.

It speaks to the growing demand as economies reopen, alongside the challenges on stock options at launch amid supply chain disruptions, microchip shortages and rising commodity prices, said Mike Englund, chief economist at Action Economics in Boulder, Colorado.

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