US Q3 GDP tracking 1.2% after August business inventories

Total business inventories were unchanged in August, weaker than forecast (0.2%) and consensus expectations (0.1%). The details of the report, however, show that the miss relative to expectations was driven by a slower pace of retail motor vehicle inventory accumulation. Excluding autos, retail inventories were up 0.4% m/m in August and revised higher in July to 0.3% m/m (initial: 0.2%). The BEA relies on different source data to estimate the retail motor vehicle portion of private inventory investment in the current quarter estimate of GDP.

"The effect on our estimate of Q3 growth was actually the opposite of what the headline business inventories number would suggest. Modestly stronger-than-expected nonautomotive retail inventories in August, along with upward revisions to July, suggest a better pace of inventory investment in Q3 than we had expected prior to this report. As a result, our Q3 GDP tracking estimate rose two-tenths, to 1.2%", says Barclays.