BUSINESS

US companies increased stockpiles 0.4 per cent in April in response to modest sales gain

06/13/2012 03:48 EDT | Updated 08/13/2012 05:12 EDT
WASHINGTON - U.S. companies increased their stockpiles at a faster rate in April, despite only modest growth in sales.

The Commerce Department said Wednesday that business stockpiles grew 0.4 per cent in April, slightly better than March's pace of 0.3 per cent.

Sales were up a modest 0.2 per cent in April, matching the revised March increase. The government had initially reported that business sales rose a stronger 0.6 per cent in March.

It would take roughly five weeks to exhaust existing stockpiles at the April sales pace. That's considered a healthy time frame and suggests businesses will keep restocking to meet demand, which should help boost growth in the April-June quarter.

When businesses step up restocking, they order more goods. That generally leads to increased factory production and higher economic growth.

But stockpile growth largely depends on the spending habits of U.S. consumers and businesses. Americans barely increased their spending at retail businesses in April and May, constrained by weak job creation and paltry wage increases.

For April, stockpiles held by retailers and wholesalers both rose 0.6 per cent. Stockpiles at the manufacturing level were unchanged.

Total inventories rose to $1.58 trillion in April, 19.7 per cent higher than the low reached in September 2009, a period when businesses were slashing inventories in response to the deep recession.

Slower stockpiling curbed growth in the January-March quarter, when the economy grew at an annual rate of 1.9 per cent compared with 3 per cent in the October-December quarter.

Weaker job creation in April and May could be forcing some consumers to scale back on spending. And pay has risen just 1.7 per cent over the past 12 months. That's slower than the rate of inflation for that period.

One positive change: Gas prices have tumbled since early April. That could give Americans more money to spend on appliances, vacations and other discretionary purchases.

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