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US wholesale inventories increase marginally in July

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US wholesale inventories increased slightly in July, the government confirmed on Wednesday, suggesting inventory investment could remain a drag on economic growth in the third quarter.

[WASHINGTON] US wholesale inventories increased slightly in July, the government confirmed on Wednesday, suggesting inventory investment could remain a drag on economic growth in the third quarter.

The Commerce Department said wholesale inventories gained 0.2 per cent as estimated last month. Stocks at wholesalers slipped 0.1 per cent in June. They increased 7.1 per cent on a year-on-year basis in July.

The component of wholesale inventories that goes into the calculation of gross domestic product edged up 0.1 per cent in July.

The pace of inventory accumulation has been slowing after stocks increased strongly from the third quarter of 2018 through the first quarter of this year. The inventory overhang has led businesses to place fewer orders at factories, contributing to a downturn in manufacturing activity.

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Inventory accumulation slowed in the second quarter, helping to hold back economic growth to a 2.0 per cent annualised rate during that period. Some of the slowdown in the pace of accumulation reflects a surge in consumer spending in the second quarter.

Businesses are also carefully managing stock levels as the economy's outlook continues to darken amid an escalation in the trade war between the United States and China, which has raised the risk of a recession.

The economy grew at a 3.1 per cent pace in the first quarter. Growth estimates for the third quarter range from a pace of 1.5 per cent to 2.2 per cent.

In July, wholesale auto inventories increased 0.5 per cent after dipping 0.1 per cent in the prior month. There were also increases in professional equipment and furniture inventories. But apparel, hardware and electrical goods inventories fell. Machinery inventories dropped by the most since December 2017.

Sales at wholesalers increased 0.3 per cent in July, reversing a 0.3  per centdrop in June. Motor vehicle sales rebounded 0.3 per cent in July after falling 0.2 per cent in the previous month.

At July's sales pace it would take wholesalers 1.36 months to clear shelves, unchanged from June. 

REUTERS