American businesses are still running down wholesale inventories, Commerce Department data showed Wednesday.
Inventories are goods produced for sale that have not yet been sold. Businesses tend to shrink inventories when they expect sales to fall and expand inventories when they expect rising sales.
In March, wholesale inventories fell 0.4 percent after climbing 0.2 percent in February. The decline matched Wall Street’s expectations. The February figure was revised down from the earlier estimate of a 0.5 percent increase.
Falling inventories subtract from gross domestic product, the government’s official scorecard of economic growth. In the first quarter of the year, the decline in inventories was responsible for a large part of the slowdown in GDP growth from 3.4 percent at the end of 2023 to 1.6 percent in the first three months of this year.
Inventories can be volatile. When businesses underestimate underlying demand, shrinking inventories can flip to expansions quickly. Similarly, big expansions in inventories that are not met with the expected demand can result in steep contractions.
Sales of wholesale inventories fell 1.3 percent from February but are up 1.4 percent from a year ago.
The inventory-to-sales ratio, which ndicates how many months it would take to sell the entire inventory at the current sales pace, declined to 1.35 in March from the year-ago level of 1.40.
