U.S. wholesale inventories increased more than previously estimated in May as automobile stocks rose amid declining sales, but inventory investment still likely weighed on economic growth in the second quarter.
The Commerce Department said on Tuesday wholesale inventories climbed 0.4 percent. That was the biggest gain since December 2016 and followed a 0.4 percent decline in April. The department reported last month that wholesale inventories increased 0.3 percent in May.
Auto inventories jumped 0.7 percent after declining 1.4 percent in April. The auto sector has been hit by slowing demand, which has seen manufacturers reporting a decrease in sales for four straight months.
The component of wholesale inventories that goes into the calculation of gross domestic product – wholesale stocks excluding autos – increased 0.3 percent in May.
A report last week showed inventories at factories slipped 0.1 percent in May. Data on retail inventories will be published on Friday. Economists expect inventory investment slowed further in the second quarter and remained a drag on GDP growth during the period.
The Atlanta Federal Reserve is forecasting GDP rising at a 2.7 percent annualized rate in the second quarter. Inventory investment subtracted 1.11 percentage points from GDP growth in the first quarter, helping to hold down the economy to a 1.4 percent growth pace.
Inventories had contributed to GDP growth for two straight quarters. They have remained lean this year, with businesses cautious amid sluggish domestic demand.
Wholesale stocks of electrical goods fell 0.3 percent in May while professional equipment inventories surged 0.7 percent.
Machinery inventories increased 0.7 percent, the largest gain since November 2014. Petroleum stocks advanced 2.6 percent, the biggest rise since last December.
Sales at wholesalers fell 0.5 percent after decreasing 0.3 percent in April. Sales of motor vehicles slipped 0.5 percent after rising 1.3 percent in April.
At May’s sales pace it would take wholesalers 1.29 months
to clear shelves, up from 1.28 months in April. The ratio has declined from 1.36 months in January last year, which was the highest since January 2009.