U.S. business inventories rose slightly less than expected in August

WASHINGTON, Oct 14 (Reuters) – U.S. business inventories rose slightly less than expected in August, but there were signs that unsold goods were piling up at retailers and wholesalers as high inflation and rising interest rates slowed demand.

Business inventories rose 0.8% after climbing 0.5% in July, the Commerce Department said on Friday. Inventories are an important component of gross domestic product. Economists polled by Reuters had forecast a 0.9% rise in inventories.

Inventories rose 18.2% in August from a year earlier.

Retail inventories rose 1.3% in August, instead of the 1.4% estimated in an advance report released last month. After that, July rose 1.0%. Retailers find themselves overloaded with merchandise, a function of easing supply chain bottlenecks and slowing demand for merchandise.

That could lead to companies offering price discounts and prevent some from placing more orders before clearing unwanted inventory, hurting manufacturing and the broader economy in the coming year.

Commodities oversupply and the Fed’s aggressive monetary policy stance have many economists predicting a recession in 2023.

The Fed has raised its policy rate from near zero in March to its current range of 3.00% to 3.25% to combat inflation. A fourth straight 75 basis point rate hike is expected next month after data on Thursday showed inflation picked up strongly in September.

Motor vehicle inventories rose 3.5% instead of the 3.7% estimated last month. They rose 3.5% in July.

Retail inventories excluding automobiles, which are included in GDP, rose 0.6% last month by an estimate.

Wholesale inventories rose 1.3% in August. Manufacturers’ inventories fell 0.1%.

For now, inventories combined with a shrinking trade deficit will boost GDP in the third quarter. The Atlanta Fed estimated that GDP rose 2.9% last quarter, following a 0.6% decline in the second quarter.

Business sales rebounded 0.3% in August after falling 1.0% in July. At the sales pace in August, it would take companies 1.33 months to clear shelves, up from 1.32 months in July.

Reporting by Lucia Mutikani; Editing by Chizu Nomiyama

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