Falling Sales Cut Inventory Growth More Than Expected

Wholesale businesses increased their inventories less than economists expected in January, as U.S. firms sought to manage their supply chain in the face of weaker sales, the Commerce Department said Friday.

Wholesale inventories rose 0.4 percent in January, less than the 0.6 percent consensus economists surveyed by both Reuters and Bloomberg predicted they would rise. Sales unexpectedly dropped by 0.1 percent.

Inventories now appear to be in pretty good shape, certainly not bloated, but not too tight either, Rusell Price, a senior economist at Ameriprise Financial, told Bloomberg.

Changes in business inventories should be a modestly positive contributor to GDP over the next several quarters as inventory levels are kept in balance with demand growth.

At the current rate of sales, wholesalers have enough inventory to last 1.15 months, data from the Commerce Department showed.

Economists had expected the growth in wholesale inventories, which rose sharply in the last quarter of last year, to temper until sales catch up. That could put downward pressure on GDP growth, which most economists expect will not exceed an annualized 2 percent rate for the first quarter.