The Department of Commerce reported that US business inventories were up better than expected in December, while sales rose by their biggest percentage since 2011. The announcement said that inventories went up by 0.4 percent, while November’s figure had to be re-stated as 0.8 percent in place of the previously announced 0.7 percent.
Business inventories are a crucial factor in the determination of the gross domestic product, or GDP.
Retail inventories were also up by 0.1 percent in December and not the 0 which had been predicted before the report was disseminated. November’s inventories climbed by 0.9 percent. Without cars the retail inventories were 0.4 percent and not the predicted 0.2 percent. This is the figure that is used to calculate GDP. November’s rise was 0.5 percent.
Inventory investment factored in a whole percentage point to the 1.9 percent annualized growth rate for the economy in the fourth quarter of 2016. That was the second quarterly contribution to the growth of GDP in a row. Since the second quarter of 2015 inventories had been holding down the growth rate of GDP.
December’s business sales climbed by 2.0 percent, the largest since March of 2011, and came right after a 0.3 percent growth in sales of November. One way to look at the sales pace versus inventory is by the measure of how long it would take to clear the shelves. With December’s sales pace it would take 1.35 months for businesses to clear the shelves, while at November’s pace it would take 1.38 months.
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