Economists surveyed by Bloomberg News had expected March 2008 inventories to rise 0.4%.
Further, inventories are now up 5.2% from May 2007, the Commerce Department said. The April business inventory statistic was revised higher to 0.5%.
Meanwhile, the inventory-to-sales ratio declined to 1.24. A year ago, the ratio was 1.26.
Economist David H. Wang told BloggingStocks Tuesday the May inventory data can be interpreted two ways, with with positive or negative dimensions, depending on how one views the current corporate stance toward the U.S. economy, and the prospects for economic growth in the quarters ahead.
On the one hand, businesses are keeping inventories at a bare minimum -- a fact that typically is bearish, short-term, for the U.S. economy, Wang said.
On the other hand, those same lean inventories mean that any sustained increase in demand will require businesses to ramp-up production quickly -- a condition that generally limits the length of a recession or economic downturn, Wang said.
"My sense is that, given other, recent, negative data points, the small rise in inventories is a sign of lack of confidence in future demand, which is understandable given the housing and energy price headwinds our economy is facing," Wang said. "Some would call that a negative view, but there are legitimate reasons for businesses to be cautious about operations and production now."
Nevertheless, Wang added that a cautious business stance now, "could set the conditions for a boom later," should demand increase in a sustained manner in the months and quarters ahead.
