U.S. wholesale inventories fall for second straight month

WASHINGTON Fri Aug 9, 2013 12:54pm EDT

The warehouse style of shopping is shown inside a Costco store in Carlsbad, California February 28, 2012. REUTERS/ Mike Blake

The warehouse style of shopping is shown inside a Costco store in Carlsbad, California February 28, 2012.

Credit: Reuters/ Mike Blake

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WASHINGTON (Reuters) - U.S. wholesale inventories unexpectedly fell for a second straight month in June, prompting economists to trim their second-quarter economic growth estimates.

The Commerce Department said on Friday wholesale inventories fell 0.2 percent after declining 0.6 percent in May.

This was weaker than the government had assumed in its advance estimate of second-quarter gross domestic product published last week, which put growth at a 1.7 percent annual pace.

Inventories are a key component of GDP changes. As a result of the unexpected decline in stocks at wholesalers in June, economists pared their estimates for second-quarter GDP growth by one-tenth of a percentage point.

They had raised their estimates to as high as a 2.5 percent pace after manufacturing inventories in June came in slightly higher and the U.S. trade deficit narrowed more than the government had estimated in its first GDP reading.

"The June (wholesale inventory) data subtract a little from the likely upward revision to second-quarter real GDP growth," said Jim O'Sullivan, chief U.S. economist at High Frequency Economics in Valhalla, New York.

Barclays lowered its second-quarter GDP estimate to a 2.4 percent pace from 2.5 percent. JPMorgan now expects growth will be revised to a 2.2 percent rate instead of 2.3 percent.

Retail inventory data to be released next week could shed more light on the size of the revision to growth. The government will publish its second GDP growth estimate on August 29.

Inventories added less than half a percentage point to second-quarter GDP growth.

Wholesale inventories in June were pulled down by automobile stocks, which tumbled 1.5 percent, the most since December. Besides automobiles, stocks of electrical goods, hardware, paper, metals and apparel also fell.

"This softer inventory accumulation in the second quarter is modestly favorable for third quarter growth," said Daniel Silver, an economist at JPMorgan in New York.

Sales at wholesalers rose 0.4 percent in June after increasing 1.5 percent in May. The rise in June was below economists' expectations for a 0.7 percent gain.

At June's sales pace it would take 1.17 months to clear shelves, the lowest since April last year. The inventories/sales ratio was 1.18 months in May.

(Reporting by Lucia Mutikani; Editing by Andrea Ricci and Kenneth Barry)

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Comments (11)
wijram wrote:
Once again a reporter shows that he/she simply does not understand the subject on which they “report” or comment. The lower inventories reported in the wholesale trade report are STRONGLY POSITIVE, not negative for the economy and the markets. Lower wholesale inventories indicate that sales were HIGHER than expected and that GREATER production (and MORE labor) is needed to restock. COME ON, folks!

Aug 09, 2013 11:00am EDT  --  Report as abuse
MikeyLikesIt wrote:
Uh oh. Bad news. Must be a conspiracy, right? RIGHT?

A two month drop in inventories may not mean a significant drop in GDP, just like a narrowing of the trade gap may not mean a significant increase. Every little aspect of this economy fits together like one big demented jigsaw puzzle.

Also, Unexpectedly.

Aug 09, 2013 11:07am EDT  --  Report as abuse
wonderinghow wrote:
Unexpectedly. Who was expecting what?

Aug 09, 2013 11:39am EDT  --  Report as abuse
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