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US wholesale inventories fall for first time since 2013
[WASHINGTON] US wholesale inventories fell in July for the first time in nearly two years, a tentative sign that businesses were starting to whittle down a huge stockpile of merchandise that could weigh on production in the second half of the year.
The Commerce Department said on Thursday that wholesale inventories slipped 0.1 per cent, the weakest reading since May 2013, as a drop in oil prices held down the value of petroleum stocks.
Wholesale stocks were revised to show a 0.7 per cent rise in June instead of the previously reported 0.9 per cent increase. Economists polled by Reuters had forecast wholesale inventories rising 0.3 per cent in July.
Inventories are a key component of gross domestic product changes. The component of wholesale inventories that goes into the calculation of GDP - wholesale stocks excluding autos - fell 0.3 per cent in July.
Petroleum inventories fell 4.8 per cent, the largest drop since last December, after rising 3.1 per cent in June.
Inventory investment contributed 0.22 per centage point to the second quarter's annualized 3.7 per cent GDP growth pace.
Business inventories have increased by more than US$100 billion in each of the last two quarters, a record back-to-back rise that economists say is unsustainable given the current sales pace.
Sales at wholesalers fell 0.3 per cent in July. At July's sales pace it would take 1.30 months to clear shelves, unchanged from June. An inventory-to-sales ratio that high usually means an unwanted inventory build-up, which would require businesses to liquidate stocks.
That in turn would weigh on manufacturing and economic growth.