WASHINGTON – Stockpiles held by wholesale businesses rose in October, while sales posted a smaller gain.
Stockpiles at the wholesale level increased 0.4 per cent, matching September’s figure, the Commerce Department reported Tuesday. Sales edged up just 0.2 per cent during the month after a flat reading in September and a 0.8 per cent drop in August.
Economists are watching closely to see if businesses become reluctant to expand inventories in the face of weaker sales. That could drag on economic growth because the restocking of store shelves spurs orders to manufacturers, which in turn boosts factory production.
But any cutback in inventory building could be a sign that businesses are worried about future sales.
The October gain in stockpiles pushed inventories at the wholesale level to a seasonally adjusted $542 billion in October, an increase of 6.8 per cent from the level a year ago.
There was a 1.2 per cent gain in stockpiles of nondurable goods in October, with paper, drugs and farm products all posting growth. Stockpiles of durable goods were flat in October. Autos, one of the bigger components, fell by 1.4 per cent.
A big rise in inventory building in the April-June quarter contributed 1.4 percentage points to growth during that period. However, businesses slowed stockpiling in the third quarter, which subtracted 0.1 percentage point from growth.
The economy posted a healthy growth rate of 3.9 per cent in the July-September period.
While analysts are looking for growth to slow to around 2.5 per cent in the current quarter, they expect the economy next year will turn in its best performance in a decade, growing by around 3.1 per cent.
Economists believe that steady job gains this year paired with big declines in energy prices will boost consumer spending.