WASHINGTON, (Reuters) - U.S. wholesale inventories fell as previously reported in October amid a surge in sales, supporting views that inventory investment would provide a modest boost to economic growth in the fourth quarter.
The Commerce Department said on Friday that wholesale inventories decreased 0.4 percent after rising 0.1 percent in September. The department reported last month that wholesale inventories declined 0.4 percent in October.
The component of wholesale inventories that goes into the calculation of GDP - wholesale stocks excluding autos - also fell 0.4 percent in October.
Inventory investment contributed half a percentage point to the economy’s 3.2 percent annualized growth rate in the third quarter. Inventories had weighed on GDP growth since the second quarter of 2015.
With a report this week showing stocks at manufacturers were unchanged in October, economists believe inventories’ contribution to growth in the fourth quarter will be modest.
Still, strong consumer demand, against the backdrop of a labor market that is near full employment, should keep the
economy on solid ground. The Atlanta Federal Reserve is forecasting GDP rising at a 2.6 percent pace this quarter.
In October, wholesale stocks of farm products increased 2.0 percent after rising 3.9 percent in September. Wholesale inventories of petroleum rose 1.9 percent, while automobile stocks gained 0.3 percent. Machinery inventories tumbled 1.0 percent in October.
Sales at wholesalers jumped 1.4 percent in October after rising 0.4 percent in September. Sales were buoyed by a 1.1 percent increase in sales of machinery as well as a 6.6 percent jump in sales of petroleum.
At October’s sales pace it would take wholesalers 1.30 months to clear shelves, down from 1.32 months in September.
While that ratio has declined from the 1.37 months touched in January, which was the highest since March 2009, it remains relatively high. That suggests the wholesale inventory drawdown could continue for a while.
Reporting by Lucia Mutikani; Editing by Paul Simao