It looks like the US economy almost shrank in the first quarter
More economists are forecasting that the US economy nearly shrank in the first quarter.
On Friday, the Commerce Department released data on February wholesale inventories, which showed that they fell by a more-than-expected 0.5%. This was the biggest month-on-month drop in nearly three years.
The updated data on January showed that wholesale inventories actually contracted in that month, by 0.2%, from a prior estimate of 0.3%.
The part of inventories that feeds directly into the GDP, which counts stock excluding autos, fell 0.4%.
After Friday's report, several economists lowered their expectations for first-quarter Gross Domestic Product (GDP).
As Deutsche Bank chief economist Peter Hooper and team explained recently in a note, the ratio of private inventories to final sales surged late last year to a six-year high.
"A full reversal of this run-up in the quarters ahead with final sales advancing only modestly could be a substantial drag on US GDP growth, amounting to as much as 1 percentage point," they forecast.
Notably, the Atlanta Fed's GDPNow tracker, which nailed the print for Q1 GDP a year ago, cut its estimate to 0.1% from 0.4%.
"After this morning's wholesale trade report from the U.S. Bureau of the Census, the forecast for the contribution of inventory investment to first-quarter real GDP growth fell from -0.4 percentage points to -0.7 percentage points," the Atlanta Fed explained in its update.
Also, Barclays lowered its forecast to 0.3% from 0.4%, and Goldman cut its estimate to 0.9% from 1.2%.
The first estimate of Q1 GDP is due on April 28.
It will be revised three times within the following four weeks.