Wholesale stockpiles rose 0.8 per cent, double the gain in April and the largest one-month rise since November, the Commerce Department reported Friday. Sales were up 0.3 per cent in May following a 1.7 per cent surge in April. That had been the biggest sales increase in more than a year.
The strong increase in inventory building in May could be evidence that businesses are growing more confident about the future. A decision to accelerate inventory stocking would help bolster overall economic growth.
The May rise left inventories at the wholesale level at a seasonally adjusted $449.8 billion, 3.8 per cent below a year ago.
Economists believe sales at both the wholesale and retail levels will rebound in coming months after a slowdown in the first quarter that was caused in part by unusually frigid weather. A pickup in consumer spending, which accounts for 70 per cent of economic activity, is expected to translate into stronger economic growth for the rest of the year.
The government has already reported that retail sales accelerated solidly in May.
The big inventory gain in May reflected larger stockpiles of autos and auto parts as well as furniture, lumber and computers.
In the January-March quarter, the harsh weather and other factors sent the economy into reverse with the gross domestic product contracting at an annual rate of 0.2 per cent. But analysts are forecasting a strong pickup in the current growth to GDP growth of around 2.5 per cent.
They expect growth will accelerate further in the second half of the year to a rate around 3 per cent.