Business Inventories Lower Than Expected

Business inventories came in lower than expected in March, at no change which is just below Econoday's low estimate. Retailer inventories fell 0.5 percent in the month which is 1 tenth below the advance estimate and a reflection of that month's rebound in retail sales which drew products off shelves. Wholesaler inventories rose 0.3 percent, which matches the advance release, while factory inventories also rose 0.3 percent and in line with the previously released factory orders report. A plus in today's report is that total sales growth, at 0.5 percent, was healthy and pulled down the inventory-to-sales ratio to a leaner 1.34 from 1.35.

Today's report will trim back inventory contribution to the second estimate of first-quarter GDP but will be offset by this morning's upward revisions to March and February retail sales which will help improve the contribution from consumer spending. For the second quarter, today's report points to healthy conditions for the nation's inventories which are ready to rise to meet continued strength in underlying demand.