U.S. Markets

U.S. business inventories increase as retailers boost stocks

WASHINGTON (Reuters) - U.S. business inventories rose in August, boosted by a larger increase in stocks at retailers than previously estimated, supporting views that inventory investment will contribute to economic growth in the third quarter.

The Commerce Department said on Friday business inventories increased 0.2 percent after being unchanged in July.

August’s rise in inventories, a key component of gross domestic product, was in line with economists’ expectations.

Retail inventories increased 0.6 percent in August, instead of rising 0.5 percent as reported in an advance report published last month. They fell 0.2 percent in July.

Retail inventories excluding autos, which go into the calculation of GDP, climbed 0.3 percent in August after declining 0.4 percent in July.

An outright drop in inventory investment subtracted almost 1.2 percentage points from GDP growth in the second quarter, the largest drag in more than two years, restricting the rise in output to a sluggish 1.4 percent pace.

Economists expect inventory accumulation will rebound in the third quarter and account for much of the anticipated acceleration in GDP growth. The Atlanta Federal Reserve is currently forecasting the economy growing at a 2.1 percent rate in the third quarter.

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

Business sales rose 0.2 percent in August after dropping 0.3 percent in July. At August’s sales pace, it would take 1.39 months for businesses to clear shelves, unchanged from July.

Reporting by Lucia Mutikani; Editing by Andrea Ricci;; 1 202 898 8315; Reuters Messaging: