WASHINGTON, (Reuters) – U.S. wholesale inventories rose in May amid a strong increase in the automotive sector, but the pace of accumulation is slowing, supporting views that inventory accumulation was probably a drag on economic growth in the second quarter.
The Commerce Department said on Wednesday wholesale inventories increased 0.4% as reported last month after advancing 0.8% in April. Wholesale inventories increased 7.7% on a year-on-year basis May.
The component of wholesale inventories that goes into the calculation of gross domestic product gained 0.2% in May.
An accumulation in inventories contributed to a 3.1% annualized increase in GDP in the first quarter. Inventories are expected to have subtracted from GDP growth in the second quarter. The Atlanta Federal Reserve is forecasting the economy grew at a 1.3% rate in the second quarter.
The government will publish its advance second-quarter GDP growth estimate later this month.
The inventory bulge is concentrated in the automobile industry, which is experiencing a slowdown in sales.
Excess inventory, together with trade tensions between the United States and China, sluggish global growth and design problems related to Boeing’s (N:) MAX 737 aircraft are weighing on manufacturing.
In May, wholesale auto inventories increased 1.8% after surging 3.9% in the prior month. There were also increases in professional equipment, furniture and hardware inventories.
But electrical goods inventories fell by the most since January 2016. Metal inventories recorded their biggest drop since October 2016.
Sales at wholesalers nudged up 0.1% in May after declining 0.4% in April. Motor vehicle sales accelerated 3.2% in May after rising 1.0%. At May’s sales pace it would take wholesalers 1.35 months to clear shelves, up from 1.34 months in April.
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