Business inventories in the U.S. increased by more than expected in the month of May, according to a report released by the Commerce Department on Friday.
The report showed business inventories shot up by 1.4 percent in May after surging by an upwardly revised 1.3 percent in April.
Economists had expected business inventories to jump by 1.2 percent, matching the advance originally reported for the previous month.
Wholesale inventories spiked by 1.8 percent during the month, while manufacturing and retail inventories shot up by 1.3 percent and 1.1 percent, respectively.
“Businesses face an arduous task as they manage their inventories in a difficult economic environment of cooling goods demand, persistent supply chain constraints, elevated inflation and higher interest rates,” said Oren Klachkin, Lead U.S. Economist at Oxford Economics.
“We expect inventories to continue marching higher, though the pace of gains will slow,” he added. “The economy is not in a recession currently but aggressive and front-loaded Fed rate hikes increase the chances of a hard landing, especially for 2023.”
Meanwhile, the Commerce Department said business sales climbed by 0.7 percent in May after rising by 0.6 percent in April.
Manufacturing sales led the way higher, surging by 1.8 percent. Wholesale sales also rose by 0.5 percent, while retail sales fell by 0.3 percent.
With inventories increasing by more than sales, the total business inventories/sales ratio crept up to 1.30 in May from 1.29 in April.
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