U.S. business inventories rise in November as sales fall

WASHINGTON, Jan 18 (Reuters) – U.S. business inventories rose in November as rising interest rates dampened sales, pushing the inventory-to-sales ratio to its highest level in nearly two years.

The Commerce Department said on Wednesday that business inventories rose 0.4% after rising 0.2% in October. Inventories are an important component of gross domestic product.

The build in inventories in November was in line with economists’ expectations. Inventories rose 15.1 percent year-over-year in November.

The pace of inventory build-up has slowed sharply from the strong pace seen in late 2021 and early 2022 due to increased supply and lower demand for commodities as the Federal Reserve aggressively raises interest rates to curb inflation.

Retail inventories rebounded 0.1% in November, as estimated in a forecast released last month. They fell 0.4% in October. Improved supply and a shift in spending toward services have added to retailers’ excess merchandise, forcing some to offer price discounts and hold off on placing more orders until they clear out unwanted inventory.

Motor vehicle inventories accelerated at a 1.1 percent pace, instead of the 1.2 percent estimated last month. They rose 0.4% in October. Retail inventories, which exclude autos, which calculates GDP, fell 0.3% from the previous month’s estimate.

Wholesale inventories rose 1.0% in November. Manufacturers’ inventories were unchanged.

Inventories have weighed on GDP for two straight quarters, adding more than 1 percentage point in the July-September quarter. The economy grew at an annualized rate of 3.2% in the third quarter. Growth in the fourth quarter is expected to be as high as 4.1%.

Business sales fell 0.8% in November after rising 0.4% in October. At November’s sales pace, it would take businesses 1.35 months to clear shelves. It was the longest stretch since December 2020, up from 1.33 months in October.

Reporting by Lucia Mutikani; Editing by Andrea Ricci

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