U.S. business inventories unexpectedly decreased in January, primarily due to a significant drop in wholesaler stockpiles. This suggests that inventory investment might act as a drag on economic growth in the first quarter.
The U.S. Census Bureau of the Commerce Department reported on Wednesday that inventories edged down 0.1% in January, following a flat reading in December. Inventories, a key and highly volatile component of Gross Domestic Product (GDP), had been forecast by economists surveyed by Reuters to rise slightly by 0.1% for the month.
Compared to January of the previous year, inventories were up 1.0%. The Census Bureau is still catching up on releasing data that was delayed during last year's government shutdown. In January, retail inventories increased by 0.3% from the previous month, after a 0.1% rise in December.
Wholesale inventories fell by 0.5% month-over-month, while manufacturing inventories saw a slight increase of 0.1%.
Despite declining for three consecutive quarters, business inventories still contributed to the annualized GDP growth rate of 0.7% in the fourth quarter. The economy had expanded at a rate of 4.4% in the third quarter.
Business sales rose by 0.3% in January compared to the previous month, following a 0.7% increase in December. Retail sales dipped slightly by 0.1%. At the January sales pace, it would take 1.35 months for businesses to clear shelves, down from 1.36 months in December.
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