U.S. wholesale inventories rise solidly, may boost second-quarter GDP

Written by Reuters | Washington | Updated: Jun 11 2014, 05:06am hrs
U.S. wholesale inventories rose more than expected in April, bolstering views of a sharp acceleration in economic growth in the second quarter.

The Commerce Department said on Tuesday wholesale inventories increased 1.1 percent after advancing by the same margin in March. The rise outstripped economists' expectations for only a 0.5 percent gain.

Inventories are a key component of gross domestic product changes. The component that goes into the calculation of GDP - wholesale stocks excluding autos - increased 1.1 percent.

A sharp slowdown in the pace of restocking by businesses helped to sink economic growth in the first quarter, but a swing in inventories is expected in the April-June period.

Data last week showed a rise in stocks at manufacturers in April and further gains are likely after a surge in automobile sales in May depleted stocks of some vehicle models.

The economy contracted at a 1.0 percent annual pace in the January-March period as inventories subtracted 1.6 percentage points from GDP. Growth this quarter is forecast topping a 3.0 percent pace, but the sturdy gains in wholesale inventories in April could prompt some economists to raise their GDP estimates.

Inventories in April were buoyed by a 2.8 percent jump in stocks of electrical goods, which was the largest increase since February 2004. Stocks of metals recorded their biggest gain since June 2011.

Sales at wholesalers increased 1.3 percent in April after rising 1.6 percent the prior month. They were driven by strong sales of autos, furniture, electrical goods and machinery.

At April's sales pace it would take 1.18 months to clear shelves, unchanged from March.