U.S. Outlook: Private inventories — A GDP growth wild card

Scott Anderson
Posted by Scott Anderson
Chief Economist

Rising business inventory levels have been boosting U.S. GDP growth in recent quarters.Aerial View Of Container port

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.

Read my full report.

Chart showing Pace of Inventory Change_41219

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