Analysts at Wells Fargo note that US business inventories rose for a third consecutive month in July and look poised to add to third quarter GDP.
“Although we only have one month of the quarter’s data in, we expect inventories will be additive to GDP in Q3. It would not take much of an increase in real inventories to provide a significant boost to GDP following two quarters of scant stock building. We are currently pencilling in a $40 billion annualized increase, which would add 0.8 percentage points to top line GDP growth. Given the late stage of the business cycle, it is not altogether shocking that we have witnessed more caution on the part of businesses recently. That caution is manifested in the seven times in the past nine quarters in which inventories have been a drag on growth. Friday’s release will be very telling for the direction inventories will push/pull GDP in Q3.”
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