March 14, 2018 / 2:07 PM / 9 days ago

U.S. business inventories rise; sales post largest drop in one-and-a-half years

WASHINGTON, (Reuters) - U.S. business inventories increased solidly in January as sales recorded their biggest drop in 1-1/2 years.

Views of Exact Sciences medical supplies inventory at the United Parcel Service's Supply Chain campus in Louisville, Kentucky, August 15, 2016. REUTERS/John Sommers II

The Commerce Department said on Wednesday that business inventories rose 0.6 percent after advancing by the same margin in December. The increase in inventories, which are a key component of gross domestic product, was in line with economists’ expectations.

Retail inventories rose 0.7 percent in January instead of the previously reported 0.8 percent in an advance report published last month. Retail inventories gained 0.3 percent in December.

Motor vehicle inventories surged 1.7 percent as previously reported after decreasing 0.3 percent in December. Retail inventories excluding autos, which go into the calculation of GDP, edged up 0.1 percent instead of rising 0.3 percent as reported last month. They shot up 0.6 percent in December.

The government estimated last month that inventory investment subtracted seven-tenths of a percentage point from GDP growth in the fourth quarter. The economy grew at a 2.5 percent annualized pace in the final three months of 2017.

Manufacturing inventories climbed 0.3 percent in January and stocks at wholesalers surged 0.8 percent.

Business sales fell 0.2 percent January, the biggest drop since July 2016, after increasing 0.5 percent in December. At January’s sales pace, it would take 1.34 months for businesses to clear shelves, up from 1.33 months in December.

Reporting by Lucia Mutiakni; Editing by Andrea Ricci

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