The Commerce Department said on Wednesday wholesale inventories
increased 0.5 percent after advancing 0.8 percent in January. The
increase in wholesale stocks in February was in line with
"The inventory data suggest more of the payback from the overhang of
last year's stockbuilding binge will be realized in the first
quarter rather than the second quarter," said Michael Feroli, an
economist at JPMorgan in New York.
Inventories are a key component of gross domestic product changes.
The component that goes into the calculation of GDP — wholesale
stocks excluding autos — rose 0.5 percent in February.
Businesses accumulated too much stock in the second half of last
year and are placing fewer orders with manufacturers while they work
through the pile of unsold goods.
That, together with severe weather, the expiration of long-term
unemployment benefits and food stamps cuts, is expected to weigh on
first-quarter GDP growth.
In the wake of the wholesale data, JPMorgan slashed its
first-quarter GDP growth estimate by half a percentage point to an
annual rate of 1.0 percent. Forecasting firm Macroeconomic Advisers
cut its forecast by two-tenths to a 0.7 percent rate.
The inventory data came on the heels of a report last week showing a
big trade deficit in February, which prompted economists to lower
their first-quarter GDP estimates.
The economy grew at a 2.6 percent annual rate in the fourth quarter,
with no contribution from inventories. First-quarter growth
estimates now range from as low as a 0.6 percent rate, but
economists expect a bounce back as the temporary drag from
inventories and the weather fade.
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"Less inventory investment in the first quarter suggests a smaller
decline in inventory investment in the second quarter," said Ben
Herzon, an economist at Macroeconomic Advisers. "As a result, we
raised our tracking forecast of second-quarter GDP growth by
one-tenth to 3.7 percent."
In February, farm inventories jumped 2.7 percent after falling 0.9
percent the prior month.
There were signs of a pick-up in demand, which could help
wholesalers to whittle down stocks. Sales at wholesalers rebounded
0.7 percent in February after dropping 1.8 percent the prior month.
At February's sales pace it would take 1.19 months to clear shelves,
unchanged from January. The ratio is at its highest level since
(Reporting by Lucia Mutikani; editing by Andrea Ricci)
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