US Dec business inventories disappoint

Published Thu, Feb 12, 2015 · 03:27 PM

[WASHINGTON] US business inventories rose less than expected in December, supporting views that fourth-quarter growth was slower than initially thought.

The Commerce Department said on Thursday business inventories nudged up 0.1 per cent after an unrevised 0.2 per cent increase in November.

Economists polled by Reuters had forecast inventories rising 0.2 per cent in December.

Inventories are a key component of gross domestic product. Retail inventories excluding autos, which go into the calculation of GDP, ticked up 0.1 per cent in December. That followed a similar gain in November.

The government estimated last month that inventories added 0.8 percentage point to the economy's annualized 2.6 per cent growth pace in the fourth quarter.

But with December manufacturing and wholesale inventory data recently coming in below the government's assumptions, economists expect that contribution could be lowered by at least five-tenths of a percentage point.

In addition, the trade deficit in December was larger than the government's estimates.

The combination of a slower pace of inventory accumulation and a weak trade deficit have left economists anticipating that the fourth-quarter GDP growth estimate could be cut to as low as a 1.7 per cent pace when the government publishes its revision later this month.

In December, business sales fell 0.9 per cent. That was the largest drop since January of 2014 and followed a 0.4 per cent drop in November.

At December's sales pace, it would take 1.33 months for businesses to clear shelves, the highest inventory-to-sales ratio since July 2009. That ratio was at 1.31 in November.

Inventories are now probably approaching levels that might make businesses uncomfortable about adding more stocks, which could mean some cutting back in the months ahead.

REUTERS

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