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With inventories at merchant wholesalers showing a notable decrease in the month of December, the Commerce Department released a report Friday morning showing that total business inventories unexpectedly fell for the month.
The report showed that business inventories fell 0.2 percent in December following an upwardly revised 0.5 percent increase in November. Economists had been expecting inventories to increase by 0.2 percent compared to the 0.4 percent growth originally reported for the previous month.
Inventories at merchant wholesalers saw a significant decline for the month, falling by 0.8 percent in December after jumping by 1.6 percent in November.
Meanwhile, inventories at manufacturers edged down by 0.1 percent in December after rising by 0.2 percent in November, while inventories at retailers were unchanged after falling by 0.2 percent in the previous month.
Commenting on the unexpected drop in inventories, Peter Boockvar, equity strategist for Miller Tabak, said, "Combining this with the higher than expected Trade Deficit on Wednesday will lead to a reduction in fourth quarter GDP estimates to closer to 5% from the initial reading of 5.7%."
The Commerce Department also said that business sales increased by 0.9 percent in December after surging up by 2.4 percent in November.
The continued increase in business sales reflected a 1.9 percent jump in sales by manufacturers as well as a 0.8 percent increase in sales by merchant wholesales. On the other hand, sales by retailers edged down by 0.1 percent for the month.
With inventories falling and sales rising, the total business inventories/sales ratio edged down to 1.26 in December from 1.27 in November. The ratio came in at 1.46 in December of 2008.
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