WASHINGTON -- U.S. wholesale inventories barely rose in July, suggesting a slower pace of stock accumulation at the start of the third quarter that prompted economists to trim growth estimates.
The Commerce Department said Wednesday wholesale inventories edged up 0.1 percent, the smallest rise since July of last year, after a 0.2 percent gain in June.
Inventories are a key component of gross domestic product changes. The component that goes into the calculation of GDP -- wholesale stocks excluding autos -- was flat.
The rise in overall stocks at wholesalers in July was well below the 0.5 percent increase that Wall Street had anticipated, leading some economists to lower their GDP growth estimates for the July-September quarter.
Barclays cut its third-quarter growth estimate by two-tenths of a percentage point to a 2.5 percent annual rate. Action Economics lowered its forecast to a 2.8 percent pace from 3 percent.
A report last week showed stocks of manufactured goods at factories rose only 0.1 percent in July. Retail inventory data for July, due to be released Friday, will shed more light on the state of restocking early in the third quarter.
Inventories added 1.4 percentage points to GDP growth in the second quarter. The slow pace of inventory accumulation, however, bodes well for fourth-quarter growth.
"While there is very little information about fourth-quarter growth available at this point, a more modest inventory accumulation in the third quarter is a positive development for fourth-quarter GDP, all else equal," said Daniel Silver, an economist at JPMorgan (JPM) in New York.
Wholesale inventories in July were held back by declines in stocks of farm products, chemicals, furniture, professional equipment, petroleum, paper and metals. Auto inventories increased 1 percent in July after declining 0.2 percent in June.
Sales at wholesalers rose 0.7 percent in July after climbing 0.4 percent in June.
At July's sales pace it would take 1.16 months to clear shelves, the lowest since December 2013 and down from 1.17 months in June.
9 Numbers That'll Tell You How the Economy's Really Doing
Wholesale Inventories Post Smallest Gain in a Year
The gross domestic product measures the level of economic activity within a country. To figure the number, the Bureau of Economic Analysis combines the total consumption of goods and services by private individuals and businesses; the total investment in capital for producing goods and services; the total amount spent and consumed by federal, state, and local government entities; and total net exports. It's important, because it serves as the primary gauge of whether the economy is growing or not. Most economists define a recession as two or more consecutive quarters of shrinking GDP.
The CPI measures current price levels for the goods and services that Americans buy. The Bureau of Labor Statistics collects price data on a basket of different items, ranging from necessities like food, clothing and housing to more discretionary expenses like eating out and entertainment. The resulting figure is then compared to those of previous months to determine the inflation rate, which is used in a variety of ways, including cost-of-living increases for Social Security and other government benefits.
The unemployment rate measures the percentage of workers within the total labor force who don't have a job, but who have looked for work in the past four weeks, and who are available to work. Those temporarily laid off from their jobs are also included as unemployed. Yet as critical as the figure is as a measure of how many people are out of work and therefore suffering financial hardship from a lack of a paycheck, one key item to note about the unemployment rate is that the number does not reflect workers who have stopped looking for work entirely. It's therefore important to look beyond the headline numbers to see whether the overall workforce is growing or shrinking.
The trade deficit measures the difference between the value of a nation's imported and exported goods. When exports exceed imports, a country runs a trade surplus. But in the U.S., imports have exceeded exports consistently for decades. The figure is important as a measure of U.S. competitiveness in the global market, as well as the nation's dependence on foreign countries.
Each month, the Bureau of Economic Analysis measures changes in the total amount of income that the U.S. population earns, as well as the total amount they spend on goods and services. But there's a reason we've combined them on one slide: In addition to being useful statistics separately for gauging Americans' earning power and spending activity, looking at those numbers in combination gives you a sense of how much people are saving for their future.
Consumers play a vital role in powering the overall economy, and so measures of how confident they are about the economy's prospects are important in predicting its future health. The Conference Board does a survey asking consumers to give their assessment of both current and future economic conditions, with questions about business and employment conditions as well as expected future family income.
The health of the housing market is closely tied to the overall direction of the broader economy. The S&P/Case-Shiller Home Price Index, named for economists Karl Case and Robert Shiller, provides a way to measure home prices, allowing comparisons not just across time but also among different markets in cities and regions of the nation. The number is important not just to home builders and home buyers, but to the millions of people with jobs related to housing and construction.
Most economic data provides a backward-looking view of what has already happened to the economy. But the Conference Board's Leading Economic Index attempts to gauge the future. To do so, the index looks at data on employment, manufacturing, home construction, consumer sentiment, and the stock and bond markets to put together a complete picture of expected economic conditions ahead.