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U.S. business inventories increase for second straight month in August - Metro US

U.S. business inventories increase for second straight month in August

Warehouse workers deal with inventory stacked up to the ceiling at an ABT Electronics Facility in Glenview

WASHINGTON (Reuters) – U.S. business inventories increased for a second straight month in August, suggesting restocking could blunt the hit to economic growth in the third quarter from a widening trade deficit.

Business inventories rose 0.3% in August after edging up 0.1% in July, the Commerce Department said on Friday. Inventories, a key component of gross domestic product, increased in July after six straight monthly declines.

Economists polled by Reuters had forecast business stocks rising 0.4% in August.

Retail inventories increased 0.4% in August instead of 0.8% as estimated in an advance report published last month. That followed a 1.2% rebound in July. Motor vehicle inventories rose 0.3% rather than 0.6% as previously reported. Retail inventories excluding autos, which go into the calculation of GDP, increased 0.5% instead of 0.9% as estimated last month.

An inventory drawdown contributed to GDP declining at a record 31.4% annualized rate in the second quarter. Inventories subtracted 3.5 percentage points from GDP, the most since the first quarter of 1988. They have been a drag on GDP for five straight quarters. The economy fell into recession in February.

Businesses are rebuilding inventories with imports, which led to the goods trade deficit surging to a record high in August. With most of the imports going to replenish inventories, the wider goods trade deficit will likely make a small dent in GDP growth in the third quarter. Trade contributed to GDP growth in the last three quarters.

Wholesale inventories rose 0.4% in August. Stocks at manufacturers were unchanged.

Business sales increased 0.6% in August after surging 3.4% in July. At August’s sales pace, it would take 1.32 months for businesses to clear shelves, down from 1.33 months in July.

(Reporting by Lucia Mutikani; Editing by Andrea Ricci)

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