BUSINESS

US businesses increased stockpiles more slowly in February, a sign they expected weaker sales

04/12/2013 10:08 EDT | Updated 06/12/2013 05:12 EDT
WASHINGTON - U.S. companies restocked their shelves at a much slower pace in February than January, a sign they expected consumer and business spending to weaken.

Business stockpiles increased only 0.1 per cent in February, the Commerce Department said Friday. That's the smallest gain since June and down from a 0.9 per cent increase in January, which was revised slightly lower.

Total business sales rose at a healthy 1.2 per cent pace in February, mostly because retail sales grew. But a separate report Friday showed retail sales fell 0.4 per cent in March.

Restocking helps drive economic growth. When companies order more goods, factory output increases. Economists had expected a bigger gain in stockpiles in February, so the lacklustre increase could lead some to pare back their economic growth forecasts for the January-March quarter.

Prior to the February report, many had been predicting growth accelerated in the first quarter to an annual rate of roughly 3 per cent. Even slightly slower growth would be better than the expansion rate of just 0.4 per cent rate in the October-December quarter. Growth was held back in the fourth quarter by weaker restocking and steep cuts in defence spending.

Economists expect consumer spending rose from January through March, helped by strong gains in February. But the weaker retail spending in March signals growth may slow in the April-June quarter.

Job growth is also a question. Businesses stepped up hiring over the winter, adding an average of 220,000 jobs from November through February. But employers added just 88,000 net jobs in March, which likely weighed on spending last month, too.

Friday's report covers a broader range of companies than the wholesale report. It measures stockpiles held by manufacturers, wholesalers and retailers