US business inventories are rising, but their pace is slowing

US business inventories are rising, but their pace is slowing

WASHINGTON (Reuters) – U.S. business inventories increased in July, but the pace slowed considerably compared to previous months, likely because sluggish demand amid higher interest rates is forcing companies to be cautious.

The Commerce Department said Thursday that business inventories increased 0.6% after rising 1.4% in June. Inventories are an essential component of GDP. The increase in July was in line with economists’ expectations.

Inventories rose 18.4% year over year in July.

Retail inventories rose 1.2% in July, instead of 1.1% as expected in an advance report published last month. This followed a 2.0% increase in June.

Auto stocks rose 3.5% as expected last month. They rose 3.3% in June.

Retail inventories excluding autos, which go into the GDP calculation, rose 0.4% as estimated last month.

The sharp slowdown in the pace of inventory buildup in the second quarter compared to the active rate in the January-March quarter affected GDP in the fourth quarter. The economy contracted at a rate of 0.6% on an annual basis in the second quarter after contracting at a pace of 1.6% in the January-March period.

Wholesale inventories rose 0.6% in July. Stocks in manufacturers rose 0.1%.

Business sales fell 0.9% in July after rising 1.2% in June. At the July sales pace, it would take 1.32 months for companies to empty shelves, up from 1.30 in June.

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