The U.S. business inventory levels stayed steady during April according to Commerce Department statistics which showed manufacturing stock decreases balanced out increases in other sectors thus indicating potential GDP growth slowdown in the second quarter.
The inventory figures remained steady at zero percent after March’s 0.1% increase while matching market predictions. The 2.2% annual increase in inventory levels now threatens to slow down economic expansion after boosting first-quarter growth.
Businesses increased their stockpiles in Q1 through aggressive inventory buildup because of new tariffs which added 2.25 percentage points to GDP. The trade deficit increased because of rising imports which resulted in a 0.2% decrease in total economic output.
The April retail inventory figures matched expectations by showing no change despite initial predictions of a 0.1% decrease. The 0.8% decrease in auto inventories matched previous estimates better than the 0.9% decline while retail inventories excluding autos—a key GDP indicator—increased by 0.3%.
The reduction in import demand together with the shrinking trade deficit leads analysts to predict stronger GDP growth for Q2. The Atlanta Fed predicts that GDP will expand at an annual rate of 3.8%. The strength of the upcoming economic recovery depends heavily on inventory levels.
