By Katherine Hyunjung Lee
Business inventories for manufacturers, wholesalers and retailers in January increased a seasonally adjusted 0.3 percent, after a 0.4 percent rise in December, according to data released Wednesday by the U.S. Census Bureau.
Auto inventories posted the sharpest rise — up a seasonally adjusted 2.4 percent. Economists said a broad increase in other durable goods categories, such as furniture, appliances and building materials, were a good sign.
“Inventories will provide support to headline GDP for the first quarter of 2017,” Daniel Sanabria, senior economist at Comerica Bank, wrote in a blog post.
Sanabria also observed “the overall inventory-to-sales ratio is trending down, which is a good sign, after trending up through 2015.”
The total business inventories-to-sale ratio remained constant from December at 1.35 percent.
The level of inventories is closely watched by economists because it is a component of gross domestic product and can signal turning points in the economy.
“Fluctuations in inventories in fixed investments, which could include housing and durable goods, account for all of the fluctuations in the business cycle,” said Thomas Kevin Swift, chief economist at the American Chemistry Council.
Rising inventories may signal business optimism and boost GDP. But a pile-up of inventories may reflect slowing consumer spending that could lead to cuts in production and employment.
“To the extent that the inventory imbalance that has occurred in 2015 is easing, productive activity will improve going forward.” Swift said. “Sales are now well above the growth rate in inventory, which is good for the economy and good for manufacturing.”
The Manufacturing and Trade Inventories and Sales estimates are based on monthly surveys for retail trade and wholesale trade, as well as surveys on manufacturers’ shipments, inventories and orders.