US business inventories unchanged in May

WASHINGTON (Reuters) -U.S. business inventories were unchanged for a second straight month in May, suggesting that inventories could subtract from gross domestic product in the second quarter.

The flat reading in inventories reported by the Commerce Department's Census Bureau on Thursday was in line with economists' expectations. Inventories are a key component of GDP. They increased 1.7% year on year.

Inventories are also the most volatile component of GDP.

They surged at a $160.5 billion annualized rate in the first quarter as businesses stocked up ahead of President Donald Trump's sweeping tariffs on imported goods, adding 2.59 percentage points to GDP, the most since the fourth quarter of 2021.

But that was insufficient to offset a record 4.61-percentage-point drag from a sharp widening in the trade deficit that resulted from the imports deluge. The economy contracted at a 0.5% pace in the January-March quarter.

Retail inventories gained 0.3% in May as estimated in an advance report published last month. They were unchanged in April. Motor vehicle inventories increased 0.6% as previously reported. They fell 0.7% in April.

Retail inventories excluding autos, which go into the calculation of GDP, rose 0.2% as initially reported.

Wholesale inventories fell 0.3% in May, while stocks at manufacturers rose 0.1%.

Business sales dropped 0.4% in May after declining 0.2% in April. At May's sales pace, it would take 1.39 months for businesses to clear shelves, up from 1.38 months in April.

(Reporting by Lucia Mutikani; Editing by Mark Porter)

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