BUSINESS

US businesses increased stockpiles 0.3 per cent in November as sales rose 1 per cent

01/15/2013 10:06 EST | Updated 03/17/2013 05:12 EDT
WASHINGTON - U.S. companies increased their stockpiles a steady pace in November from October, responding to a solid increase in sales.

The Commerce Department said Tuesday that business inventories grew 0.3 per cent in November, matching the October gain.

Sales rose 1 per cent in November, the best showing since a 1.2 per cent rise in September. In October, sales had fallen 0.3 per cent, reflecting in part disruptions caused by Superstorm Sandy.

More restocking leads to more factory production, which boosts economic growth. Faster restocking helped the economy grow at a 3.1 per cent annual rate from July through September.

Most economists say inventory growth has slowed from this summer, a key reason many are predicting economic growth weakened to a rate below 2 per cent in the October-December quarter.

The inventory to sales ratio has held steady since August, a sign that businesses were not expecting much growth in sales. In November, the ratio was 1.28 months. That means it would take about five weeks to exhaust stockpiles at the November sales pace.

The sales gain in November was led by a 2.3 per cent surge in demand at the wholesale level. A separate report Tuesday showed that retail sales increased again in December, rising 0.5 per cent, the best showing since September.

Total inventories rose to a seasonally adjusted $1.62 trillion in November, up 23.9 per cent from the recession low hit in September 2009.

Retail inventories rose 0.6 per cent in November, leading all categories. Wholesale stockpiles grew 0.3 per cent, while manufacturing inventories were flat.

Income growth remains weak, constraining the amount that consumers can devote to increased spending. Consumer spending drives roughly 70 per cent of economic activity.

Job growth has been steady, although unemployment is still high at 7.8 per cent. In December, employers added 155,000 jobs, roughly matching the monthly average in 2011 and 2012.

The economy has shown some signs of improvement. The once-battered housing market is recovering, which should lead to more construction jobs in the coming months. Autos sales in 2012 were the best in five years. And a gauge of U.S. service firms' business activity expanded in December by the most in nearly a year.