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 (9-Aug.) 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. (Reuters)