U.S. Markets closed

Solid U.S. wholesale inventories data seen boosting growth

Cargo stands on the floor of a bonded warehouse at John F. Kennedy International Airport in New York June 16, 2014. REUTERS/Lucas Jackson

WASHINGTON (Reuters) - U.S. wholesale inventories rose more than expected in October, prompting some economists to raise their growth forecasts for the fourth quarter.

The Commerce Department said on Tuesday wholesale inventories increased 0.4 percent, despite an energy price-related decline in the value of petroleum stocks. September's wholesale stocks were revised up to show a 0.4 percent gain.

Inventories are a key component of gross domestic product changes. The component that goes into the calculation of GDP -wholesale stocks excluding autos - increased 0.6 percent.

Barclays raised its fourth-quarter growth estimate by two-tenths of a percentage point to an annual pace of 2.5 percent. The economy grew at a 3.9 percent pace in the third quarter, with inventories acting as a mild drag.

However, the upward revision to overall wholesale stocks in September suggested third-quarter GDP growth would be raised by at least 0.1 percentage point when the government publishes its second revision of the data later this month, economists said.

JPMorgan cautioned that the apparent strong inventory accumulation in the third quarter posed a downside risk to GDP growth estimates in the final three months of the year.

Wall Street had expected wholesale inventories to rise only 0.2 percent in October following a previously reported 0.3 percent increase in September.

Stocks at wholesalers in October were lifted by increases in inventories of electrical goods, machinery, apparel, metals and other products. Auto inventories fell 1.4 percent, the largest decline in a year.

That reflected strong auto sales at dealerships in October and followed September's 0.7 percent rise.

Sales at wholesalers gained 0.2 percent in October after being flat the prior month. At October's sales pace it would take 1.19 months to clear shelves, unchanged from September.

(Reporting by Lucia Mutikani; Editing by Paul Simao)