U.S. business inventories rise solidly in June By Reuters

U.S. business inventories rise solidly in June By Reuters

WASHINGTON (Reuters) – U.S. business inventories increased strongly in June, though raw material shortages continue to frustrate efforts by motor vehicle retailers to restock.

Business inventories rose 0.8% after advancing 0.6% in May, the Commerce Department said on Tuesday. Inventories are a key component of gross domestic product. June’s increase was in line with economists’ expectations.

Inventories increased 6.6% on a year-on-year basis in June.

Retail inventories gained 0.3% in June as estimated in an advance report published last month. That followed a 0.9% drop in May.

Motor vehicle inventories decreased 0.3% as estimated last month. A global semiconductor shortage is undercutting auto production, leading to stocks being run down and holding back retail sales.

Retail inventories excluding autos, which go into the calculation of GDP, increased 0.5%, instead of 0.6% as estimated last month.

Business inventories were depleted at a rapid clip in the second quarter amid booming domestic demand fueled by massive fiscal stimulus and the economy’s reopening following disruptions early in the COVID-19 pandemic.

The government reported last month that consumer spending picked up in the second quarter, with outlays on goods rising solidly, even as demand rotates back to services because of COVID-19 vaccinations. The double-digit growth in consumer spending last quarter helped to lift the level of GDP above its peak in the fourth quarter of 2019.

Inventory rebuilding is expected to underpin economic growth in the second half of the year.

Wholesale inventories increased 1.1% in June. Stocks at manufacturers advanced 1.0%.

Business sales increased 1.4% in June after falling 0.2% in May. At June’s sales pace, it would take 1.25 months for businesses to clear shelves, down from 1.26 months in May.

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