WASHINGTON (Reuters) - Stocks of unsold goods at wholesalers rose modestly in March, according to government data on Wednesday that suggested a downward revision to the initial first-quarter growth estimate.
Wholesale inventories increased 0.3 percent to a record $480.4 billion, the Commerce Department said, after an unrevised 0.9 percent rise in February.
The increase was half what economists polled by Reuters had expected, leaving them to conclude that the government would likely lower its first-quarter GDP estimate to an annual pace of 1.9 percent from the 2.2 percent rate it reported last month.
The change in inventories is a key component in the calculation of GDP. However, the actual size of the revision would be depend on data next week on overall business inventories for March.
Trade data for March to be released on Thursday will also have an impact on the first-quarter GDP estimate. The government used estimates for both business inventories and the trade balance for its first GDP estimate, published last month.
Economists said the wholesale numbers, particularly the ex-autos component that goes into the GDP calculation, had come in softer than the government’s assumptions.
“Combined with data on manufacturing inventories that had already been reported, it now looks like the change in inventories in will be revised down from the first estimate of $69.5 billion to about $58 billion,” said Daniel Silver, an economist at JPMorgan in New York.
“This downward revision should be a positive for second-quarter growth because less inventory accumulation in the first quarter implies that inventories should be less of a headwind for growth in the second quarter.”
Inventories contributed 0.6 percentage point to first-quarter GDP growth, far less than the 1.81 percentage points in the fourth quarter.
Wholesale inventories in March were held back by a 5.9 percent drop in the value of petroleum stocks, the largest decline since May 2010, partly reflecting retreating crude oil prices.
Automobile inventories climbed 0.4 percent in March after declining 1 percent the prior month. There has been a strong demand for motor vehicles, prompting manufacturers to ramp up production. Economists, however, warn manufacturers will have to scale back on production to prevent an unwanted inventory build.
In March, sales at wholesalers rose 0.5 percent after rising 1.1 percent in February. Economists had expected sales to increase 0.7 percent in March.
Sales at wholesalers in March were mixed, with automobiles falling 1.7 percent, the largest drop since May last year. Petroleum sales increased 2.7 percent after rising 4.4 percent in February.
At March’s sales pace it will take 1.17 months to clear shelves, unchanged for the sixth straight month.
“This suggests that recent stock building has been a planned response to expectations of rising demand, rather than reflecting weaker sales,” said Peter Newland, an economist at Barclays in New York.
Reporting by Lucia Mutikani; Editing by Neil Stempleman