U.S. wholesale inventories revised higher in September

FILE PHOTO: Automobiles are seen for sale in a car lot in Queens, New York, U.S., May 24, 2018. REUTERS/Shannon Stapleton

WASHINGTON (Reuters) – U.S. wholesale inventories increased more than initially thought in September, but automobile stocks declined further amid a global semiconductor shortage, which is undercutting motor vehicle production.

The Commerce Department said on Wednesday that wholesale inventories increased 1.4%, instead of 1.1% as estimated last month. Stocks at wholesalers rose 1.3% in August. Wholesale inventories jumped 13.1% in September from a year earlier.

Motor vehicle inventories declined 1.8% after falling 0.3% in August. Inventories are a key part of gross domestic product. Wholesale inventories, excluding autos, shot up 1.7% in September. This component goes into the calculation of GDP.

A slower pace of inventory decline in the third quarter accounted for all of the 2.0% annualized increase in GDP growth last quarter. Inventories were depleted in the first half of the year, but COVID-19 pandemic-related shortages are making it difficult to rebuild stocks.

Restocking is expected to underpin manufacturing and economic growth in the fourth quarter. But some economists are starting to worry that the inventory imbalance could derail the economic expansion.

“The current supply-chain disruptions are making it difficult for businesses to manage their inventories,” said Ryan Sweet, a senior economist at Moody’s Analytics in West Chester, Pennsylvania. “Therefore, it’s possible that businesses are caught with excess inventories in a couple of years as they over-order today to compensate for the delays. This has caused recessions in the past and is a symptom of a boom-bust cycle.”

Sales at wholesalers rose 1.1% in September after falling 0.9% in August. At September’s sales pace it would take wholesalers 1.23 months to clear shelves, unchanged from August.

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