Business Inventories Rise, But Lower Than Expected

Business inventories rose a lower-than-expected 0.1 percent in June which, like this morning's downward revision to June retail sales, will trim back forecasts for the second estimate of second-quarter GDP. But this only a statistical nuance and as the marginal build in inventories is actually very positive for the economy given the strength of business sales which rose 0.3 percent in the month. Year-on-year growth in inventories is at 4.0 percent, less than half of the 8.2 percent rise for sales. As inventories are built, production and employment should get a lift.

Inventories at retailers look thin especially given the strength of retail spending. Inventories for this sector edged only 0.1 percent higher with the year-on-year rate at 1.7 percent. Inventories at manufacturers and at wholesalers also rose only 0.1 percent in June with these yearly rates both at 5.1 percent.