For the 2nd consecutive month in a row, the US business inventories reading remained unchanged. This indicates that US companies are more careful about managing their inventories as they anticipate weak demand. As for the reason behind the forecast of weak demand, the biggest one is the current interest rate policy in the USA.
According to economists, a 0.1% increase in business inventories was expected during the month. However, the actual value came out at 2.0% YoY, similar to what we saw last month.
US GDP Increased 2.4% YoY
Furthermore, investment in the private inventory also only contributed to a small jump in the GDP during Q2 2023. However, that was an improvement considering the private inventory investment was weighing heavily during Q1 2023. Overall, the economy of the USA increased by 2.4% on a yearly basis during Q2 2023.
If we look at the numbers of retail inventories, the reading was 0.7%. This was in accordance with the estimates set by the US authorities and the market players. Just a month earlier, the retail inventories jumped by 0.6%, which tells us that the inventories are slowly increasing.
Similarly, the inventory of motor vehicles rose by 1.5% in June, while the previous month's reading was 2.7%. If we look at the retail sales inventory without the autos, it jumped 0.3% against a forecast of 0.4%.
At the same time, the wholesale inventories in the USA were down by 0.5%. However, the key thing to note here is that the stock levels of major manufacturers remained unchanged.
If we take all of this data into account, it would roughly take 1 and a half months for the businesses to clear their shelves.
The bigger picture that can be derived from the recent data docket is the uncertainty regarding inflation and interest rate in the USA. The major firms are fearful that more rate hikes are on the way and, thus are cautious about their inventory levels.