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US Wholesale Inventories Rise 0.3 Percent in June

H.S. Borji
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US wholesale inventories advanced at a slower rate than forecast in June and were downwardly revised in May, which could dampen the government’s revised estimate of second quarter growth.

Wholesale inventories rose 0.3 percent to $533.5 billion, following a downwardly revised gain of 0.3 percent the previous month, the Commerce Department reported today in Washington. Economists forecast a monthly gain of 0.6 percent.

Compared to June 2013, wholesale inventories were up 7.9 percent.

Wholesale inventories, which measure how much US wholesalers adjusted their stockpiles, are a key component of gross domestic product. Faster restocking at wholesaler businesses boosts economic growth because it reflects stronger demand for factory goods, which leads to greater manufacturing output.

June durable goods inventories increase 0.7 percent and were up 8.8 percent from a year ago.

Inventories of nondurable goods declined 0.2 percent from May, but advanced 6.4 percent from a year earlier.

Inventories of metals and minerals excluding petroleum advanced 3.2 percent from the previous month.

Inventories of computer and software equipment increased 1.8 percent, official data showed.

Sales at wholesalers increased 0.2 percent to $454.4 billion in June. Compared to year ago levels, wholesale sales were up 6.5 percent. At the current sales pace, it would take 1.17 months for wholesalers to clear existing inventory. That was little changed from the June 2013 ratio of 1.16.

Today’s figures dampen expectations about second quarter growth, which according to the Commerce Department was stronger than forecast. The US economy grew at an annual rate of 4 percent between April and June, well above the consensus estimate.

Analysts were optimistic the second quarter estimate would be revised upward after government data on Wednesday showed the country’s trade deficit narrowed to a five-month low in June.

The trade deficit in June shrank from US $44.66 billion to US $41.54 billion. That figure was smaller than what the Commerce Department had assumed in its advance estimate of second quarter GDP growth.

The Commerce Department will post its revised estimate of second quarter growth on August 28.

The US economy is forecast to growth between 2.1 percent and 2.3 percent in 2014, according to revised estimates from the Federal Reserve. The first quarter contraction forced the central bank to downgrade its outlook for this year. However, the Fed is optimistic the recovery efforts will broaden in the second half of the year as the economy rebounds from the first quarter slowdown.

The Federal Reserve last week reduced its holdings of US Treasuries and mortgage-backed securities by another $10 billion, but gave no indication about when it would begin considering a rate-hike. The central bank will wind down its record stimulus program in October, according to forecasts.

According to market opinion, the Fed is unlikely to shift its stance on monetary policy until the middle of next year. However, upbeat economic data has raised bets the central bank will lift its benchmark interest rate sooner than previously planned. This has resulted in a stronger dollar, which advanced to a more than ten-month high this week.

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