U.S. Wholesale Inventories Unchanged in July, Sales Fall

Economic Indicators Reuters

U.S. wholesale inventories were unchanged in July as previously reported and sales fell, suggesting a limited boost to economic growth from restocking in the third quarter.

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The Commerce Department said on Friday that the flat reading followed a 0.3 percent increase in June. The department in its recently introduced monthly advance economic indicators report published last month had estimated that wholesale inventories would be unchanged in July.

The component of wholesale inventories that goes into the calculation of GDP - wholesale stocks excluding autos - was also unchanged in July.

An outright drop in inventory investment subtracted almost 1.3 percentage points from GDP growth in the second quarter, the largest drag in more than two years, restricting the rise in output to an anemic 1.1 percent annual rate.

Inventories have weighed on GDP growth since the second quarter of 2015 as businesses sold stockpiles of unwanted goods, helping to undercut manufacturing activity.

Some economists believe the inventory drawdown probably ended in the second quarter and expect restocking to drive an anticipated rebound in GDP growth in the third quarter. The Atlanta Federal Reserve is forecasting GDP rising at a 3.5 percent rate in the July-September quarter.

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In July, wholesale stocks of farm products fell 2.0 percent after increasing 2.8 percent in June. Wholesale inventories of petroleum declined 1.2 percent, while stocks of automobiles rose 0.4 percent.

Sales at wholesalers fell 0.4 percent in July, the biggest drop since January, after jumping 1.7 percent in June. Sales were weighed down by a 3.5 percent drop at petroleum wholesalers, as well as a 0.3 percent fall in auto sales.

At July's sales pace it would take wholesalers 1.34 months to clear shelves, up from 1.33 months in June. While the ratio has declined from 1.37 months touched in January, which was the highest since March 2009, it remains relatively high and suggests the inventory drawdown is still to run its course. (Reporting by Lucia Mutikani; Editing by Andrea Ricci)

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