September 8, 2005

Wholesale inventories, jobless claims dip

By Mark Felsenthal

WASHINGTON (Reuters) - Stocks at U.S. wholesalers fell
unexpectedly in July and claims for unemployment benefits also
dipped, but the two government economic reports on Thursday did
not take Hurricane Katrina's full impact into account.

Inventories at U.S. wholesalers dropped 0.1 percent, while
sales rose 0.5 percent on a jump in demand for oil, the
Commerce Department said.

The number of Americans making initial claims for jobless
aid fell 1,000 last week, the Labor Department said. However
analysts expect that number to jump when data are revised to
include a surge of claims after Katrina.

Markets were carefully watching energy costs after the
storm. Stock indexes declined on worries that high energy costs
would hurt consumer spending in the aftermath of Katrina. The
Dow Jones industrial average was down 26 points, or 0.24
percent, at 10,607.

Bond prices fell as industry data showed gasoline
inventories had fallen less than expected in the wake of the
storm. Benchmark 10-year notes were up 3/32 in price for a
yield of 4.13 percent after briefly erasing nearly all their
gains after the oil industry data. Yields ended the day on
Wednesday at 4.14 percent.

The decline in wholesale stocks was the first since January
2004, the Commerce Department said.

Wall Street analysts had expected wholesale inventories to
rise 0.5 percent, according to a Reuters poll.

Stocks of durable goods -- products meant to last three
years or more -- rose 0.3 percent in July, as inventories of
electrical equipment, machinery, cars, furniture and lumber

Nondurable stocks fell 0.7 percent, the biggest decline
since January 2004, as stocks of drugs plunged 4.9 percent and
inventories of paper, groceries, chemicals and alcohol dipped.

The inventories-to-sales ratio, a measure of how long it
would take to deplete stocks at the current sales pace, dropped
to 1.18 months from 1.19 in June.

The 0.5 percent gain in wholesale sales matched June's
advance. Sales of petroleum products by wholesalers jumped 7.6
percent in July, the largest gain since March.

A dip in inventories can mean demand is outstripping
wholesalers' ability to stock supplies. But it could also
indicate that wholesalers are keeping inventories lean based on
doubt about future demand.

In a separate report, the government said an upward
revision of jobless claims is expected as hurricane-stricken
states on the U.S. Gulf Coast process applications.

First-time claims for unemployment insurance benefits
dropped to 319,000 last week from 320,000 the prior week, the
Labor Department said. This included about 10,000
disaster-related applications for aid from hurricane-battered
Alabama, Louisiana and Mississippi.

Economists surveyed by Reuters had expected claims to fall
5,000 to 315,000 last week.

Hurricane Katrina, the costliest storm to slam into the
United States, targeted the worst of its fury on New Orleans
and sent tens of thousands out of work.

Louisiana officials said earlier this week they have
received an overwhelming number of claims and it would be
another week or so until the state can begin to process them.

As a result, analysts expect claims to rocket next week and
the aftermath of the hurricane to skew the data for weeks.

A four-week moving average of claims, seen by many
economists as a better guide to the employment situation
because it smooths weekly volatility, rose for the fourth
straight week, climbing to 318,500 from 316,500.

(Additional reporting by Nancy Waitz)