U.S. Wholesale Inventories Update

WASHINGTON (Reuters) – U.S. wholesale inventories increased less than initially estimated in July amidst a notable rebound in sales, raising doubts about the contribution of inventory investment to economic growth in the third quarter.

The Commerce Department’s Census Bureau reported on Monday that wholesale inventories rose by 0.2%, revised down from the 0.3% gain initially estimated last month. Stocks at wholesalers remained unchanged in June.

Economists polled by Reuters had anticipated that the rise in inventories, a crucial element of gross domestic product (GDP), would remain at 0.3%. Year-on-year, inventories increased by 0.4% in July.

Private inventory investment was a contributing factor to the economy’s 3.0% annualized growth rate in the second quarter. There is optimism that inventories might mitigate some of the pressure on GDP resulting from a widening trade deficit this quarter.

The trade gap has widened as businesses increased imports, likely in expectation of rising tariffs on goods. Most of these imports could remain unsold in warehouses. The focus now turns to the retail inventory data, which is scheduled for release next week.

Wholesale motor vehicle inventories increased by 1.0% after a 0.7% rise in June. Excluding autos, wholesale inventories saw a modest gain of 0.1% in July. This component is included in the GDP calculation.

Sales at wholesalers surged by 1.1% in July, following a 0.3% decline in June. With July’s sales pace, it would take wholesalers 1.35 months to clear their shelves, down from 1.36 months in June.