The spike in inventories was the largest since 1998, and such large increases are usually followed by slower inventory growth in the following quarter. Most economists expect a slowdown in the final three months of 2013 that would drag gross domestic product well below 2%.
Some retail analysts say companies failed to sell as many goods as they expected during the kickoff to the holiday season. If that’s the case, companies might have to cut prices to drum sales and accept lower profit margins. The 3.6% annualized growth rate is the fastest since the first quarter of 2012. Economists had expected gross domestic product to be revised up to 3.2% from an initial read of 2.8%.
The economy is projected to slow to a 1.6% rate in the fourth quarter, however, because of less warehouse stockpiling and the drag from the government shutdown in October.