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US Wholesale Inventories Rise Faster Than Forecast in January

H.S. Borji
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US wholesale inventories rose faster than forecast in January after cooling at the end of the year, although sales remained weak, offering a mixed picture of the recovery at the start of the year.

Wholesale inventories climbed 0.3 percent to $548.7 billion at the end of January, following no change the previous month, the Commerce Department reported today in Washington. Economists forecast no change in wholesale inventories at the start of the year.

Compared to January 2014, wholesale inventories were up 6.2 percent.

Wholesale inventories, which measure how quickly US wholesale businesses are adjusting stockpiles, are used to calculate gross domestic product. Faster restocking at wholesalers boosts economic growth because it reflects stronger demand for factory goods, which leads to higher manufacturing output.

January durable goods inventories were up 0.6 percent from December and 7.7 percent year-on-year.

Inventories of nondurable goods decreased 0.1 percent from December, but were up 3.7 percent in annualized terms, official data showed.

Wholesale sales declined 3.1 percent to $433.7 billion in January and were down 1 percent compared to year-ago levels, while the December estimate was revised down 0.5 percent.

At the current sales pace, it would take 1.27 months for wholesale businesses to clear existing inventory, based on the adjusted data. The January 2014 ratio was 1.18.

On Thursday the Commerce Department will release data on January business inventories, a more complete measure of stockpile accumulation that includes manufacturers, retailers and wholesalers. Total business inventories are forecast to increase 0.1 percent in January following an identical increase a month earlier.

Stockpile accumulation made a smaller contribution to GDP in the fourth quarter. The US economy expanded just 2.2 percent annually in the fourth quarter, following a revised 5 percent gain in the third quarter that was also the strongest in 11 years. Businesses accumulated $88.4 billion worth of inventory in the final three months of the year, far less than the initial estimate of $113.1 billion. As a result, GDP growth resulting from stockpile accumulation was revised down to 0.1 percentage point from 0.8 percentage point. The slower pace of stockpile accumulation will probably boost first quarter GDP growth, according to economists.

The US economy is expected to grow by as much as 3 percent this year, according to the Federal Reserve’s latest summary of economic projections. The Federal Reserve will issue a rate statement next week, which will be accompanied by fresh GDP, unemployment and inflation forecasts.

Central bankers have pledged patience in beginning to normalize monetary policy, but stronger than forecast job creation may leave a midyear rate hike on the table. Employers added 295,000 nonfarm payrolls in February, as the unemployment rate dipped to a new six-and-a-half year low of 5.5 percent, the Labor Department reported last week.

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