February 25, 2019
WASHINGTON, (Reuters) – U.S. wholesale inventories increased by the most in more than five years in December as sales continued to decline, suggesting an unintended piling up of goods at wholesalers that could be flagging a slowdown in demand.
The Commerce Department said on Monday wholesale inventories surged 1.1 percent, the largest gain since October 2013. Data for November was revised higher to show wholesale inventories rising 0.4 percent instead of 0.3 percent as previously reported. Wholesale inventories increased 7.3 percent on a year-on-year basis in December.
Economists polled by Reuters had forecast inventories at wholesalers rising 0.3 percent in December.
The component of wholesale inventories that goes into the calculation of gross domestic product growth rose 1.1 percent in December. The December wholesale inventory report was delayed by a five-week partial shutdown of the federal government that ended on Jan. 25.
Despite goods piling up at wholesalers, data so far suggests that inventories probably subtracted from GDP growth in the fourth quarter. Inventory investment added 2.33 percentage points to the third quarter’s 3.4 percent annualized growth rate.
Reports on December retail sales and business spending plans on equipment have also pointed to a slowdown in growth at the tail end of 2018. The Atlanta Federal Reserve is forecasting GDP rising at a rate of 1.4 percent. The government will publish its delayed fourth-quarter GDP report on Thursday.
In December, wholesale auto inventories increased 0.9 percent after gaining 0.6 percent in November. Hardware inventories jumped 1.7 percent, the biggest increase since June 2012, after rising 1.2 percent in November. Furniture stocks rose 2.4 percent, the most since November 2012.
Apparel inventories jumped 3.8 percent, the largest advance since September 2010.
Sales at wholesalers dropped 1.0 percent in December after falling 1.2 percent in November. There were decreases in sales of motor vehicles and hardware, among others.
At December’s sales pace it would take wholesalers 1.33 months to clear shelves, the most since November 2016, up from 1.30 months in November.
(Reporting by Lucia Mutikani Editing by Paul Simao)