WASHINGTON (Reuters) – U.S. wholesale inventories rose strongly in November, lifting the inventories-to-sales ratio to the highest level in nearly 2-1/2 years, as higher borrowing costs dampened sales.
The Commerce Department said Tuesday that wholesale inventories rose 1.0%, as reported last month. Inventories at wholesalers rose 0.6% in October. Economists polled by Reuters had expected inventories to remain unchanged.
Inventories are an important component of GDP. Wholesale inventory growth accelerated .9% year-on-year in November. Nonetheless, compared to the strong pace of the later 2021 and early 2007 periods, the pace of inventory accumulation has slowed considerably, due in part to supply chain improvements and Declining demand for commodities The Federal Reserve has aggressively raised interest rates to fight inflation.
The U.S. central bank raised its policy rate by 75 basis points last year, from near zero to a 4.20%-4.75% range, the highest since the later period 75 . Last month, the Fed projected that borrowing costs would increase by at least 75 basis points by the end of 2023 year-end.
Furniture, computer and professional equipment inventories increased and electrical equipment, metal, hardware and machinery inventories increased. But motor garage presence was unchanged after rising 0.5 percent in October.
Wholesale inventories excluding autos rose 1.0% in November. This part enters into the calculation of GDP. The rise in this component in November suggested that inventories were likely to contribute to GDP in the fourth quarter after two consecutive quarters of drag.
The annualized growth rate in the fourth quarter is estimated to be as high as 3.8%. The economy grew 3.2% in the third quarter after contracting in the 2023 first half.
Sales at wholesalers fell 0.6% in November after being flat in October. Sales of durable goods fell, while sales of nondurable goods rose moderately. Durable goods are often purchased on credit.
At November’s sales pace, wholesalers will need 1. 25 months to clear their shelves, since June 425 and October’s 1.25 month’s longest. Rising inventories of unsold goods have forced some retailers to offer steep discounts, which should help lower inflation over time.