US wholesale inventories dropped by a record 1.4 percent in December and sales plunged, a report showed on Tuesday, as the worsening economic climate crimped investment and spending. The Commerce Department said wholesale inventories for November were revised to a 0.9 percent drop, previously reported as a 0.6 percent decline. Compared to the same period a year ago, inventories rose 3.4 percent.
Economists polled by Reuters had expected a 0.8 percent drop in December. The drop in inventories could mean that fourth quarter gross domestic product (GDP) figures would be sharply revised down. Fourth quarter GDP fell 3.8 percent, but the drop was cushioned by a $6.2 billion increase in inventories, according to a government report released last month.
The shift in inventories added 1.3 percentage points to the change in GDP, meaning the economy would otherwise have contracted by at least 5 percent. The Commerce Department said wholesale sales tumbled 3.6 percent in December after dropping a revised 7.3 percent the previous month. November sales were initially reported as 7.1 percent lower.