US Business Inventories Post Biggest Decline Since 2011

U.S. business inventories in November posted their biggest decline in more than five years as businesses intensified efforts to reduce stockpiles of unsold merchandise, the government reported Friday in the latest sign that economic growth slowed sharply in the fourth quarter.

The Commerce Department said business inventories fell 0.2 percent, the largest decrease since September 2011, after a 0.1 percent drop in October. Business sales fell 0.2 percent in December after declining 0.3 percent the previous month.

Inventories are a key component of gross domestic product (GDP). Retail inventories excluding autos, which go into the calculation of GDP, rose 0.2 percent in November after a 0.3 percent gain the previous month.

Record-high inventory accumulation in the first half of 2015, which grew faster than demand, left businesses with excess unsold goods and little incentive to order more merchandise, contributing to a sharp slowdown in manufacturing activity.

Inventories subtracted 0.71 percentage point from third-quarter GDP, limiting the growth in output to a 2.0 percent annualized rate. Fourth-quarter GDP growth estimates range between a 0.5 and 1.4 percent pace.