Businesses Increase Stockpiles at Slower Pace in Possible Growth Omen

Wednesday, 13 Aug 2014 10:11 AM

 

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U.S. businesses added to their stockpiles at a slightly slower pace in June compared with May, possibly reflecting weaker sales in the past two months.

Business stockpiles increased 0.4 percent in June on a seasonally adjusted basis after a 0.5 percent gain in May, the Commerce Department said Wednesday. Sales rose 0.3 percent in June, matching the May increase. Sales have slowed after rapid gains from February through April.

The sales slowdown was also evident in a separate report showing that July retail sales were flat.

But analysts say they think solid job growth will give a boost to consumer spending and the economy in coming months. Many foresee an annual economic growth rate of around 3 percent in the second half of this year.

The 0.4 percent rise in inventories in June was in line with economists' expectations. It reflected a 0.5 percent increase in inventories held by retailers and 0.3 percent gains in inventories held by manufacturers and by wholesalers.

Inventory growth is closely watched by economists. When companies add goods to store shelves and warehouses, it shows optimism about future demand. Increasing orders to restock lifts factory production and overall economic growth.

In the April-June quarter, an acceleration in inventory building contributed 40 percent of the economy's 4 percent annual growth rate during the period.

That strong growth rebound followed the first three months of the year, when severe winter weather put the economy into reverse, shrinking at an annual rate of 2.1 percent. During the first quarter, the slowdown in inventory restocking subtracted 1.2 percentage points from growth.

For the rest of the year, most analysts predict that inventory building will support economic growth but will not exhibit the sharp swings seen in the first and second quarters.

© Copyright 2014 The Associated Press. All rights reserved. This material may not be published, broadcast, rewritten or redistributed.

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