U.S. wholesale inventories increased as much lower rate that expected in March as new care inventories took the biggest fall in three years.

Wholesale inventories increased by 0.4% to a seasonally adjusted $346.71 billion, after climbing 0.6% in February, the U.S. Commerce Department said today.

Economists had forecast an increase of 0.9%.

Sales at the wholesale level rose 0.2% to a seasonally adjusted $291.49 billion, following a revised 0.5% drop in February.

In annual terms, sales jumped 7.2% from March 2004, while inventories increased 10.8%. Inventories eclipsed sales on a year-over-year basis in February after a long period spent lagging the pace of demand.

Inventories of durable goods, items meant to last three or more years, rose 0.1%, after rising 0.5% in February. Durable-goods sales decreased 0.5%, following a 1.0% drop. The climb in durable-goods inventories was led by a 1.3% increase in machinery. Metals rose 1.5%. Auto inventories shrank 2.3%, which was the biggest decrease since December 2001’s 2.4% drop.

Inventories of nondurable items such as food and clothing rose 1.0% as petroleum stocks swelled by 9.3%. In annual terms, petroleum inventories climbed 71.0% from last March.

The drop in durable-goods sales was led by a 0.9% decrease in demand for autos and a 4.1% fall in lumber. Nondurable sales rose 0.9% as petroleum demand shot up 9.2%.