US GDP to Rise, Inventories Up Most in 5 Years

US GDP to Rise, Inventories Up Most in 5 Years

FLASH: US Growth Estimates Raised

US wholesale inventories increased by the most in more than 5 years in December.

The surge in wholesale stocks reported by the Commerce Department on Monday, however, implied inventories were less of a drag on economic growth in Q-4 than previously thought.

As result, economists boosted their Q-4 GDP growth estimates by as much as half a percentage point to as high as a 2.4% annualized rate.

“While the jump in inventories in December represents an upside risk to the fourth-quarter GDP report coming out on Thursday, declining wholesale and retail sales in December could be another sign of weaker demand and slow GDP growth in the first quarter,” said the chief economist at Bank of the West in San Francisco.

Wholesale inventories surged 1.1%, the largest gain since October 2013. Data for November was revised higher to show wholesale inventories rising 0.4% instead of 0.3% as previously reported. Wholesale inventories increased 7.3% Y-Y basis in December.

Economists polled had forecast inventories at wholesalers rising 0.3% in December.

The component of wholesale inventories that goes into the calculation of GDP growth rose 1.1% in December. The December wholesale inventory report was delayed by a 5-week partial shutdown of the federal government that ended on 25 January

Stay tuned…

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