The U.S. economy is likely growing at a 1.7% annualized rate in the third quarter, despite a slight narrowing of the U.S. trade deficit in July, the Atlanta Federal Reserve’s GDPNow forecast model showed on Wednesday.
This was slower than the 1.8% pace estimated by the Atlanta Fed’s GDP program late last week.
The economy grew at a 2.0% rate last quarter, slowing from the January-March quarter’s brisk 3.1% pace.
" After this morning's wholesale trade report from the U.S. Census Bureau, the nowcast of the contribution of inventory investment to third-quarter real GDP growth decreased from 0.12 percentage points to 0.01 percentage points," the Atlanta Fed said.
The next GDPNow update is Wednesday, October 16.
The Atlanta Fed issued to lower revision after U.S. wholesale inventories increased less than initially estimated in August, suggesting inventory investment could remain a drag on economic growth in the third quarter.
The Commerce Department said on Wednesday that wholesale inventories rose 0.2% in August instead of the previously reported 0.4% gain. Stocks at wholesalers increased 0.2% in July. They advanced 6.2% on a year-on-year basis in August.
The component of wholesale inventories that goes into the calculation of gross domestic product rose 0.2% in August.
The pace of inventory accumulation has been slowing after stocks increased strongly from the third quarter of 2018 through the first quarter of this year. The inventory overhang has led businesses to place fewer orders at factories, contributing to a downturn in manufacturing activity, Reuters reported.
Inventory accumulation slowed in the second quarter, helping to hold back economic growth to a 2.0% annualized rate during the period. Some of the moderation in the pace of accumulation reflects an acceleration in consumer spending in the second quarter.
Businesses are also carefully managing stock levels as the economy's outlook continues to darken amid lingering trade tensions between the United States and China, which have stoked financial market fears of a recession.
The economy grew at a 3.1% pace in the first quarter. Growth estimates for the third quarter range from as low as a 1.5% annualized rate to as high as a 2.0% pace.
In August, wholesale auto inventories edged up 0.1% after jumping 0.7% in the prior month. Hardware inventories surged 1.8%, the most since October 2018. There were also increases in machinery, apparel, electrical and lumber inventories.
But furniture and professional equipment inventories fell. Petroleum inventories tumbled 4.5%, the most since December 2018, after dropping 0.9% in July.
Sales at wholesalers were unchanged in August after rising 0.2% in July. Motor vehicle sales increased 0.8% in August after rising 0.5% in the previous month. Apparel sales dropped 5.1%, the largest decline in a year, after falling 2.1% in July.
At August's sales pace it would take wholesalers 1.36 months to clear shelves, unchanged from July.
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