US business inventories increase slightly above expectations in May By Reuters

WASHINGTON (Reuters) – U.S. business inventories increased slightly more than expected in May amid solid rises in stocks at wholesalers and retailers, a trend that could see inventory investment contributing to economic growth in the second quarter.

Inventories rose 0.5% after climbing 0.3% in April, the Commerce Department’s Census Bureau said on Tuesday. Economists polled by Reuters had forecast inventories, a key component of gross domestic product, rising 0.4%.

Inventories advanced 1.6% year-on-year in May.

Private inventory investment has been a drag on GDP for two straight quarters as businesses carefully managed stocks and domestic demand remained strong. There is cautious optimism that inventory accumulation could offset some of the anticipated hit on GDP from a widening trade deficit.

Growth estimates for the second quarter are around a 2% annualized rate. The economy grew at a 1.4% pace in the January-March quarter. The government is scheduled to publish its snapshot of second-quarter GDP next week.

Retail inventories increased 0.6% in May instead of 0.7% as estimated in an advance report published last month. They rose 0.8% in April. Motor vehicle inventories advanced 2.0% as previously reported. They increased 1.9% in April.

Retail inventories excluding autos, which go into the calculation of GDP, were unchanged as reported last month. They advanced 0.2% in April.

Wholesale inventories increased 0.6% in May, while stocks at manufacturers gained 0.2%.

Business sales were unchanged in May after rising 0.2% in April. At May’s sales pace, it would take 1.37 months for businesses to clear shelves, unchanged from April.

(This story has been corrected to change the month to April from May in paragraph 2)