U.S. business inventories increased strongly in January, though the pace slowed from prior months, which could result in inventory investment making no contribution to economic growth in the first quarter.
Business inventories rose 1.1% after advancing 2.4% in December, the Commerce Department said on Wednesday. Inventories are a key component of gross domestic product. January’s increase was in line with economists’ expectations. Inventories gained 11.4% on a year-on-year basis in January.
Retail inventories increased 2.0% in January, instead of 1.9% as estimated in an advance report published last month. That followed a 4.7% jump in December.
Motor vehicle inventories climbed 2.4% as estimated last month. They accelerated 6.9% in December. Retail inventories excluding autos, which go into the calculation of GDP, advanced 1.8%, rather than the 1.7% estimated last month.
Inventory investment surged at a robust seasonally adjusted annualized rate of $171.2 billion in the fourth quarter, contributing 4.90 percentage points to the quarter’s 7.0% growth pace. Most economists see further scope for inventories to rise, noting that inflation-adjusted inventories remain below their pre-pandemic level. Sales-inventory ratios are also low.
