U.S. wholesale inventories barely rose in July, suggesting a slower pace of stock accumulation at the start of the third quarter that prompted economists to trim growth estimates.
The Commerce Department said on Wednesday wholesale inventories edged up 0.1 percent, the smallest rise since July of last year, after a 0.2 percent gain in June.
Inventories are a key component of gross domestic product changes. The component that goes into the calculation of GDP – wholesale stocks excluding autos – was flat.
The rise in overall stocks at wholesalers in July was well below the 0.5 percent increase that Wall Street had anticipated, leading some economists to lower their GDP growth estimates for the July-September quarter.
Barclays cut its third-quarter growth estimate by two-tenths of a percentage point to a 2.5 percent annual rate. Action Economics lowered its forecast to a 2.8 percent pace from 3.0 percent.
A report last week showed stocks of manufactured goods at factories rose only 0.1 percent in July. Retail inventory data for July, due to be released on Friday, will shed more light on the state of restocking early in the third quarter.
Inventories added 1.4 percentage points to GDP growth in the second quarter. The slow pace of inventory accumulation, however, bodes well for fourth-quarter growth.
“While there is very little information about fourth-quarter growth available at this point, a more modest inventory accumulation in the third quarter is a positive development for fourth-quarter GDP, all else equal,” said Daniel Silver, an economist at JPMorgan in New York.
Wholesale inventories in July were held back by declines in stocks of farm products, chemicals, furniture, professional equipment, petroleum, paper and metals. Auto inventories increased 1.0 percent in July after declining 0.2 percent in June.
Sales at wholesalers rose 0.7 percent in July after climbing 0.4 percent in June.
At July’s sales pace it would take 1.16 months to clear shelves, the lowest since December 2013 and down from 1.17 months in June.