In its first estimate of GDP, the BEA assumed a brisk pace of inventory building in the fourth quarter. Today’s business inventories report suggests the initially-reported 0.8 percent boost may be revised lower.
Slower Inventory Build as Sales Slump
- The 0.1 percent increase in business inventories for December was smaller than the 0.2 percent gain that had been expected by the consensus.
- Sales were weak across the board in December, with manufacturers reporting a monthly sales decline of 1.1 percent and retailers posting a similar drop. In a separate report this morning, we learned that January retail sales fell again.
Q4 Inventory Build Not Entirely Intentional
- Consumption spending was strong in the fourth quarter, but equipment spending fell modestly. So is the inventory build intentional as consumer-oriented businesses stock up? Or is it unintentional as businesses were caught flat footed by the cutbacks in equipment spending? The inventory-to-sales figures showed increases across the board, which suggests at least some of the inventory build was unintended.
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