Wholesale Inventories Unexpectedly Decline In October

Date: December 10, 2015

Increase Driven By Non-durable Goods

According to Commerce Department data, wholesale inventories declined by 0.1 percent in October after a 0.5 percent increase in September. Reuters reported that economists had expected inventories to rise 0.1 percent. Sales at the wholesale level were unchanged for the month. The low level of inventory growth may prove to be a drag on GDP estimates for the fourth quarter, which economists project will be about 2 percent. JPMorgan economist Daniel Silver said, “We think that the drag from inventories in the fourth quarter will be more severe than we had previously believed.” Similarly, the AP said the inventory and sales reports were “possible signs of modest growth this quarter.” The “drop in wholesale inventories in October could mean that inventory reductions will drag growth this quarter as well.”

What This Means For Small Businesses

The decline in wholesale inventories, driven by non-durable goods, may indicate some challenging times ahead for small businesses. This lack of enthusiasm about the US economy echoes the latest NFIB Small Business Optimism Index, which found that small business owners are also showing growing unease over the economic climate. As NFIB Chief Economist William Dunkelberg said, “Small business owners are finding little to be hopeful or optimistic about including the economy in the New Year” due to a multitude of concerns like Federal Reserve inaction on interest rates and burdensome government regulations. However, Dunkelberg also said, “Overall, the outlook remains about the same, slow 2 percent-ish growth, payroll employment growth averaging around 200,000 a month, 100,000 in the Household Survey (enough to keep the unemployment rate around 5 percent), not much pressure on prices from Main Street. Just hoping for a Happy New Year to show up.”

Additional Reading

24/7 Wall Street also covered the story.

Note: this article is intended to keep small business owners up on the latest news. It does not necessarily represent the policy stances of NFIB.

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