U.S. Business Inventories Rebound in January

WASHINGTON (Reuters) – U.S. business inventories rebounded in January as declining sales boosted stocks at wholesalers, which could contribute to economic growth in the first quarter.

Inventories increased by 0.3% after a 0.2% decline in December, according to the Commerce Department’s Census Bureau.

The rise in inventories, a key component of gross domestic product (GDP), aligned with economists’ expectations. Year-on-year, inventories increased by 2.3% in January, although they remain the most volatile component of GDP.

Private inventories were nearly depleted in the fourth quarter due to strong consumer spending, partly driven by pre-emptive buying ahead of anticipated tariffs on imports.

In the fourth quarter, inventories negatively impacted GDP growth, contributing to a 2.3% annualized growth rate. Current GDP estimates for the January-March quarter range from a 2.4% contraction to a 1.3% growth rate.

Retail inventories remained unchanged instead of the anticipated 0.1% dip as reported in a previous advance report. They had dropped 0.5% in December.

Motor vehicle inventories decreased by 1.0%, slightly better than the previously reported 1.1% drop, and fell 1.5% in December.

Retail inventories excluding autos, influential in GDP calculation, rose by 0.5%, compared to an earlier report of 0.4%. They slipped 0.1% in December.

Wholesale inventories increased by 0.8% in January, while stocks at manufacturers edged up by 0.1%.

Business sales fell 0.8% in January, following a 1.0% advance in December. Based on January’s sales pace, it would take 1.37 months for businesses to clear shelves, up from 1.35 months in December.