US wholesale inventories rise modestly in July

US wholesale inventories increased less than previously estimated in July, suggesting businesses were cautious about rebuilding stockpiles after drawing them down sharply in the second quarter.

Figures released by the Commerce Department’s Census Bureau on Wednesday showed wholesale inventories edged up 0.1%, revised down from an earlier estimate of 0.2%.

Economists surveyed by Reuters had expected no change from the initial reading.

The small gain followed a 0.2% rise in June and left inventories 1.3% higher than a year earlier.

Motor vehicle inventories fell 1.6%, offset by a 1.9% jump in apparel stocks, a 1.8% increase in prescription medications, and a 2.0% rise in groceries.

Compared with pre-pandemic norms, the July increase looked subdued.

Between 2015 and 2019, wholesale inventories typically rose around 0.3% to 0.4% on a monthly basis, reflecting steadier restocking cycles.

The slower pace this summer suggests businesses remain wary about committing to larger stockpiles amid uncertainty over consumer demand and interest rates.

Inventories had decreased at a $32.9 billion annualized rate in the second quarter, subtracting 3.29 percentage points from GDP.

That drag was more than offset by a record boost from trade, allowing the economy to expand at a 3.3% annualized pace after contracting in the first quarter.

Source: US Census Bureau

Sales growth points to steady demand

Sales at wholesalers advanced 1.4% in July after a 0.7% gain in June.

At the current pace, it would take 1.28 months for wholesalers to clear shelves, down slightly from 1.29 months in June, indicating relatively steady demand.

Softer producer prices strengthen case for Fed cut

Separately, the Bureau of Labor Statistics reported producer prices unexpectedly slipped 0.1% in August, after a downwardly revised 0.7% increase in July.

On a 12-month basis, the Producer Price Index rose 2.6%, below forecasts.

The softer data bolstered expectations that the Federal Reserve will deliver its first rate cut since December 2024 at next week’s policy meeting.

Money markets now see a 92.7% chance of a quarter-point cut and a 7.3% chance of a larger half-point move, according to LSEG data.

President Donald Trump again pressed Fed Chair Jerome Powell to “make a big cut now,” as investors awaited Thursday’s consumer price report for further clarity on the inflation outlook.