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US wholesale inventories grow at modest pace in June for 2nd month, as sales slow

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WASHINGTON — U.S. wholesalers restocked their warehouses at a modest pace in June for a second straight month, a sign they may anticipate slower growth ahead.

The Commerce Department said Friday that wholesale inventories rose 0.3 percent, the same as the previous month. May's inventory gain was revised down from 0.5 percent.

The slowdown in restocking likely reflects weaker wholesale sales. Sales grew just 0.2 percent in June, down from 0.7 percent in May.

In June, companies boosted their stockpiles of furniture, lumber, computer equipment, and steel and other metals. But auto inventories fell, even as sales jumped. That suggests automakers will need to keep cranking out cars to meet strong demand.

PHOTO: In this June 17, 2014 photo, a stocker rolls product to restock at a Kroger grocery store in Richardson, Texas. The Commerce Department releases wholesale trade inventories for June on Friday, Aug. 8, 2014. (AP Photo/LM Otero)
In this June 17, 2014 photo, a stocker rolls product to restock at a Kroger grocery store in Richardson, Texas. The Commerce Department releases wholesale trade inventories for June on Friday, Aug. 8, 2014. (AP Photo/LM Otero)

The report shows that inventory levels are roughly in line with sales. That means wholesalers likely haven't gone too far in restocking their goods. As a result, they probably won't have to slow restocking in the coming months.

Slower rebuilding of inventories can drag on growth. That's because it means fewer orders for factory goods.

That is what happened in the first three months of the year, when a big downshift in inventory building subtracted 1.2 percentage points from the economy's growth. The economy contracted at a sharp 2.1 percent annual rate. Harsh winter weather and a big drop in exports also contributed to the decline.

The slowdown was temporary, however. Inventory restocking contributed about 1.7 percentage points to growth in the second quarter, when the economy expanded at a 4 percent annual rate.

The report Friday covers inventories held at the wholesale level. In a later report, the government will detail inventories at the manufacturing and retail levels.

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