US business inventories: Negative streak may end in the 3Q – Wells Fargo

Research Team at Wells Fargo, suggests that the US business inventories have been a drag on GDP growth for five consecutive quarters now, but the negative streak may end in the third quarter.

Key Quotes

“Business inventories were flat in July with flat readings for manufacturers and wholesalers. Retail inventories were the only sector showing a decline of 0.3 percent for the month. The inventory-to-sales ratio remained stable at 1.39 months. Our expectation is that inventories likely rose 0.1 percent in August. While we do not expect another quarter of contraction from inventories in Q3, it does not appear that the pace of inventory building will contribute much to headline GDP growth.

Our forecast shows only a slight pace of inventory building in Q3 and Q4, which results in a contribution to change in GDP of just 0.2 and 0.4 percentage points, respectively.”