Business inventories in the USA have seen an upsurge even as sales have fallen. Inventory accumulation in warehouses due to lack of sales is likely to drag down growth during Q2 2019, as per government estimates. The Department of Commerce stated that there was a 0.5% increase in business inventories, a level that had remained unchanged ever since March.
GDP estimates are made out of many components, of which inventories form a significant part. April’s actual growth analysis was just as top economists had expected. Increase in retain inventories was about 0.5%, which was predicted in a report published the previous month.
However, reports of motor vehicle inventory stocks advancing 0.6% fell short of the actual surge of 0.8% during April. Retail inventories, when calculated excluding autos, showed an increase of 0.4% when compared to May reports, meaning that this excess accumulation of inventory could hurt GDP growth rates for Q2 2019.
Inventory investment measures were reported by the government to have added as much as 0.60% points to the US economy’s annualized growth of 3.1% for Q1 2019. Most of this accumulation shows reduced domestic demand for products in Q1 period 2019. The ongoing trade conflict between China and the US is also a major factor for the current inventory accumulation in effect.
Businesses have decided to stock up on their products, trying to avoid negative outcomes in case of increased tariff measures. Wholesale inventory levels rose by 0.8% during April. Manufacturers also increased their stock accumulation rates by 0.3%.
This current manufacturing glut, mostly from the automobile industry has been a major factor for the present slow production rate growth at factories. Inventories