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U.S. Business Inventories Rise 0.4% In October, Matching Expectations

U.S. Business Inventories Rise 0.4% In October, Matching Expectations

Business inventories in the U.S. increased in line with economist estimates in the month of October, according to a report released by the Commerce Department on Thursday, although the report also showed a drop in business sales.

The report showed that business inventories rose by 0.4 percent in October following a 0.7 percent increase in September. The increase in inventories matched the expectations of economists.

Notable increases in inventories at retailers and merchant wholesalers contributed to the overall growth, with both sectors seeing 0.6 percent increases in inventories. Inventories at manufacturers showed a more modest 0.1 percent increase.

The Commerce Department said business inventories in October were up 5.7 percent compared to the same month a year ago.

Peter Boockvar, managing director at Miller Tabak, noted that the pace of inventory growth moderated in October after helping to boost GDP growth in the third quarter.

"Bottom line, inventories will likely be a drag on Q4 GDP in contrast to the large boost in Q3 and with the other components to GDP impacted by the Hurricane with little offsets, GDP in Q4 is expected to be up just 1.4% according to the consensus," Boockvar said.

Meanwhile, the Commerce Department also said business sales fell by 0.4 percent in October after surging up by 1.2 percent in the previous month.

The report said sales by merchant wholesalers fell by 1.2 percent for the month, while sales by retailers dropped by 0.4 percent. On the other hand, sales by manufacturers rose by 0.4 percent.

Despite the monthly decrease, business sales in October remained up by 3.1 percent compared to the same month a year ago.

With inventories rising and sales, the total business inventories/sales ratio edged up to 1.29 in October from 1.28 in September. The ratio came in at 1.26 in October of 2011.

by RTT Staff Writer

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