Jul 10, 2013 11:14 AM EDT

Wholesale Inventories Drop Most in Over a Year and Half

Wholesale inventories fell in May by the most in over a year and a half, the second straight monthly decline and a sign that restocking by businesses could weigh against economic growth in the second quarter.

The Commerce Department said on Wednesday wholesale inventories dropped 0.5 percent during the month, confounding the expectations of analysts polled by Reuters, who expected an increase. It was the sharpest decline since September 2011. However, sales were stronger than expected, rising 1.6 percent.

The government also revised its estimate for inventories in April to show a 0.1 percent decline rather than a previously reported modest increase.

Inventories are a key component of gross domestic product changes.

Inventories added more than half a percentage point to first-quarter GDP growth, which advanced at a lackluster 1.8 percent annual rate. Many economists expect second-quarter growth to be weaker.

The declines in inventories during May were broad based, from long lasting manufactured goods to groceries and farm products. The fall in durable goods stocks was the largest since December 2009.

At May's sales pace it would take 1.18 months to clear shelves. The inventories/sales ratio was 1.21 months in April.

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