Tags: Business | Inventories | stockpiles | sales

Business Stockpiles Rise on Expected Higher Sales

Tuesday, 13 March 2012 10:51 AM

U.S. companies restocked at a faster pace in January, a sign that businesses expect stronger job growth to fuel more sales.

The Commerce Department says business stockpiles rose 0.7 percent in January after a 0.6 percent gain in December. Sales increased 0.4 percent January following a 0.9 percent December sales gain.

The increase pushed stockpiles up to $1.57 trillion, 19.1 percent above the recession low hit in September 2009.

Companies are building up their stockpiles again after cutting them over the summer amid recession fears. Higher inventories require more production, which boosts economic growth. It also suggests companies expect more sales.

A separate Commerce report Tuesday showed Americans increased their spending on retail goods 1.1 percent in January, evidence that job gains are boosting the economy. Consumers bought more autos, clothes and appliances. They also paid higher prices for gas.

Rising inventories were a key reason growth accelerated in the final three months of last year. Some economists had predicted restocking would slow in the current quarter and weaken growth.

But more job gains could alter that view. The economy just completed the three best months of hiring in two years, adding 734,000 net jobs from December through February. That's lowered the unemployment rate to 8.3 percent.

A rebound in hiring helped boost consumer confidence in February to the highest level in a year. It is also fueling more consumer spending, which accounts for 70 percent of economic activity.

Rising sales are keeping stockpiles from getting too high. If companies feel their inventories are excessive, they could cut back on orders, slowing the economy.

In the October-December quarter, the economy grew at an annual rate of 3 percent. Nearly two-thirds of the fourth quarter growth came from a surge in inventory rebuilding.

Economists at JPMorgan Chase forecast growth in January-March at an annual rate of 1.5 percent, largely because of the slower growth in restocking. For the whole year, they expect the economy will grow 2.2 percent, up from 1.7 percent growth in 2011.

Stockpiles held by manufacturers account for nearly 40 percent of total business inventories, while wholesalers and retailers each hold about one third.

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Tuesday, 13 March 2012 10:51 AM
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