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US business inventories fall slightly, sales weaken further

Wednesday, April 13, 2016 - 22:39

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US business inventories fell marginally in February as automobile stocks rose, but persistently weak sales suggested businesses could take longer than previously thought to reduce a glut of unsold merchandise.

[WASHINGTON] US business inventories fell marginally in February as automobile stocks rose, but persistently weak sales suggested businesses could take longer than previously thought to reduce a glut of unsold merchandise.

The Commerce Department said on Wednesday that inventories, a key component of gross domestic product, slipped 0.1 per cent in February, which was in line with economists' expectations. Inventories in January were revised down to show a 0.1 per cent drop instead of the previously reported 0.1 per cent gain.

Retail inventories excluding autos, which go into the calculation of GDP, rose 0.3 per cent in February after increasing 0.2 per cent in January. Auto inventories rose 1.3 per cent in February after increasing 0.8 per cent in January.

Inventories subtracted about two-tenths of a per centage point from fourth-quarter GDP growth.

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Economic growth estimates for the first quarter are currently as low as a 0.2 per cent annualized rate. The economy expanded at a 1.4 per cent pace in the fourth quarter.

Businesses accumulated record inventories in the first half of 2015, which outpaced demand. Despite their concerted efforts to reduce unsold goods through deep discounts, inventories still remain too high and pose a downside risk to GDP growth in the first half of 2016.

Business sales fell 0.4 per cent in February after decreasing 0.8 per cent in January. At February's sales pace, it would take 1.41 months for businesses to clear shelves. That matched February's inventory-to-sales ratio, which was the highest since May 2009.

The high ratio suggests businesses could continue working through the inventory overhang through the first half of the year, hurting manufacturing and curbing GDP growth.

REUTERS

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