WASHINGTON, (Reuters) - U.S. business inventories increased in October, lifted by stocks at retailers, suggesting inventory investment could again contribute to economic growth in the fourth quarter.
The Commerce Department said on Friday that business inventories rose 0.2% after slipping 0.1% in September. Inventories are a key component of gross domestic product.
October’s increase was in line with economists’ expectations. Retail inventories rose 0.3% in October as estimated in an advance report published last month. That followed a 0.1% gain in September.
Motor vehicle inventories fell 0.2% in October, rather than dipping 0.1% as previously reported. Retail inventories excluding autos, which go into the calculation of GDP, increased 0.7%, instead of advancing 0.6% as reported last month.
The pace of inventory accumulation had slowed in the second quarter after stocks surged from the third quarter of 2018 through the first quarter of this year. The inventory overhang has led businesses to place fewer orders at factories, contributing to a downturn in manufacturing activity.
Inventory accumulation helped to raise economic growth to a 2.1% annualized rate in the third quarter, offsetting the drag to GDP from a wider trade deficit. The economy grew at a 2.0% pace in the second quarter. Growth estimates for the fourth quarter are converging around a 1.8% rate.
Wholesale inventories edged up 0.1% in October, while stocks at manufacturers ticked up 0.1%.
Business sales eased 0.1% in October after dropping 0.4% in the prior month. At October’s sales pace, it would take 1.40 months for businesses to clear shelves, unchanged from September.
Motor vehicle sales increased 1.0% in October after decreasing 1.1% in September. The auto inventory-to-sales ratio fell to 2.31 months from 2.34 months in September.
Reporting by Lucia Mutikani; Editing by Paul Simao