U.S. Outlook: Private inventories — A GDP growth wild card
Rising business inventory levels have been boosting U.S. GDP growth in recent quarters.
The average increase in real private inventories doubled from 2017 to 2018, from $22.5 billion per quarter annualized on average to $45.0 billion per quarter annualized in 2018, according to data from the Bureau of Economic Analysis.
Wholesale inventories of computers, machinery, and automotive have climbed 15.6%, 13.7%, and 9.5% respectively from a year ago.
For more on this, see highlights of my report below, followed by a link to the full U.S. Outlook, delivered on April 12.Key observations:
- If the first quarter of 2019 is any guide, the pace of business inventory building appears to be on track to double again in 2019.
- The annualized change in real private inventories in the first quarter is likely to exceed $110 billion.
- After lackluster private inventory growth in 2016 and 2017, real private inventories jumped by $89.8 billion annualized in Q3 and $96.8 billion annualized in Q4.
- The swing from the second quarter’s $36.8 billion decline was a whopping $126.6 billion, adding 2.3 percentage points to the third quarter’s GDP growth alone.
- If this inventory building tails-off quickly in the quarters ahead, U.S. GDP growth could very easily surprise on the downside.