WASHINGTON, Jan 14 (Reuters) - U.S. business inventories increased further in October as sales dropped, suggesting inventories could contribute to gross domestic product in the fourth quarter.
Inventories
rose 0.3%, matching the gain in September, the Commerce Department's Census Bureau said on Wednesday. Inventories are a key component of GDP and one of the most volatile. Economists polled by Reuters had forecast inventories would rise 0.2%. They increased 1.4% on a year-over-year basis in October. The report was delayed by the 43-day shutdown of the federal government.
Retail inventories advanced 0.6% in October after increasing 0.5% in September. Motor vehicle inventories rose 1.3%, matching September's gain. Retail inventories excluding autos, which go into the calculation of GDP, increased 0.3% after edging up 0.1% in the prior month.
Wholesale inventories climbed 0.2% in October while stocks at manufacturers were unchanged.
Business inventories have declined for two straight quarters, subtracting from GDP growth. The drag was, however, more than offset by a shrinking trade deficit during that period.
The Atlanta Federal Reserve is currently forecasting GDP will increase at a 5.1% annualized rate in the fourth quarter amid a further reduction in the trade deficit. The economy grew at a 4.3% pace in the July-September quarter.
Business sales fell 0.2% in October after easing 0.1% in September. Sales at retailers fell 0.1%. At October's sales pace, it would take 1.38 months for businesses to clear shelves, up from 1.37 months in September.
(Reporting by Lucia Mutikani; Editing by Paul Simao)
