Business Inventories Rise As Expected

September business inventories rose an as-expected 0.3 percent in a useful and moderate build. Inventories at manufacturers rose a sharp 0.5 percent with inventories at wholesalers up 0.4 percent, both offsetting a marginal 0.1 percent build at retailers.

Relative to sales, inventories look like they have further to climb as sales rose at a slightly higher 0.4 percent rate in September. And though the inventory-to-sales ratio remains unchanged at 1.34, the comparison of year-on-year rates does show inventories lagging, up 4.4 percent vs a 6.6 percent rise in sales.

Inventories proved a major plus for third-quarter GDP, representing 2.1 points of the quarter's 3.5 percent growth rate. And though retail inventories look thin given the strong headline gain for this morning's October retail sales report, overall inventories do appear to be moving more in line with sales which makes for a moderate outlook on inventory contribution to fourth-quarter GDP.