US wholesale inventories saw a solid increase in May, rising by 0.6% according to the Commerce Department’s Census Bureau. This positive development suggests that inventory investment could contribute to economic growth in the second quarter. While inventories fell by 0.5% year-on-year, the recent increase could potentially offset the impact of a widening trade deficit.
The rise in wholesale motor vehicle inventories by 1.4% in May further fueled the overall inventory growth. Sales at wholesalers also increased by 0.4% in May, indicating strong consumer demand. Despite these positive signs, economists remain cautiously optimistic, predicting a 2% annualized growth rate for the second quarter.
The economy grew at a 1.4% pace in the January-March quarter, with inventory investment acting as a drag on GDP for the past two quarters. This recent increase in inventories could provide a boost, but continued caution among businesses and year-on-year declines suggest that a sustained economic recovery may still be uncertain.