Wholesale Inventories Make Unexpected Surge

U.S. wholesale inventories rose more than expected in March, suggesting restocking of goods was probably less of a drag on first-quarter growth than initially thought.

The Commerce Department said on Friday wholesale inventories increased 1.1% after rising by an upwardly revised 0.7% in February.

Economists polled by Reuters had expected wholesale stocks to rise 0.5% in March after a previously reported 0.5% gain in February.

Inventories are a key component of gross domestic product changes. The component that goes into the calculation of GDP - wholesale stocks excluding autos - increased 1.0% in March.

Businesses ramped up their pace of restocking in the second half of 2013, but the goods ended up piling up in warehouses. With demand for goods slackening in the first quarter of this year, businesses have placed fewer orders with manufacturers.

The slow pace of inventory accumulation combined with an abnormally cold winter to hold down GDP growth to a 0.1% annual pace in the first quarter.

March's trade deficit, which came in a little wider than the government had assumed when it published its advance GDP estimate last week, had suggested that GDP will be revised to show a contraction.

Construction spending and factory inventory figures for March were also not in line with the government's assumptions for the GDP report.

The government said last week that inventories sliced off more than half a percentage point from first-quarter GDP growth.

Sales at wholesalers rose 1.4% in March after increasing 0.9% the prior month.

At March's sales pace it would take 1.18 months to clear shelves, down from 1.19 months in February.