BUSINESS

US business stockpiles grew 0.3 per cent in May from April, though sales fell for second month

07/16/2012 10:49 EDT | Updated 09/15/2012 05:12 EDT
WASHINGTON - U.S. companies added to their stockpiles in May. But their sales fell for a second straight month, adding to worries that the economy has slowed.

Business stockpiles grew 0.3 per cent in May from April, matching April's increase, the Commerce Department reported Monday. Business sales fell 0.1 per cent in May, matching the April decline.

Total stockpiles rose to US$1.58 trillion in May. That's nearly 20 per cent higher than the low point in September 2009, shortly after the recession ended.

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. Americans reduced their spending at retail businesses in June for the third straight month. Many consumers are feeling constrained by weak job creation and paltry wage increases.

It would take about five weeks to exhaust total stockpiles at the May sales pace. That's considered a healthy timeframe.

Still, many economists now believe economic growth has slowed from the January-March's lacklustre 1.9 per cent annual pace.

Paul Ashworth, chief U.S. economist at Capital Economics, said growth in the April-June quarter likely fell to an annual rate of just 1.5 per cent.

For May, stockpiles increased the most at the retail level, a gain of 0.8 per cent. Stockpiles at the wholesale level rose 0.5 per cent, while manufacturing inventories declined 0.2 per cent.

Sales in May rose 0.5 per cent at the manufacturing level. But they fell at both the wholesale and retail levels.

Wholesale stockpiles account for about 27 per cent of total business inventories. Stockpiles held by retailers make up about one-third of the total and manufacturing inventories represent about 40 per cent.