Wholesale businesses boosted stockpiles by 0.5 per cent in February following an increase of 0.8 per cent in January, the Commerce Department reported Wednesday.
Sales rose 0.7 per cent in February, rebounding from a sharp 1.8 per cent drop in January which had been blamed in part on severe weather that cut into demand.
The solid gain in sales should encourage businesses to keep restocking their shelves to meet rising demand. That will mean increased orders to factories and rising production which would boost economic growth.
Many economists say that the economy slowed in the January-March quarter but will rebound this quarter.
The government tracks inventories held by wholesalers, manufacturers and retailers. The report covering all inventory levels will be issued next Monday.
For wholesale inventories, stockpiles of autos and auto parts rose 0.5 per cent while lumber stockpiles increased 1.2 per cent.
Many economists expect that the economy, which grew at a 2.6 per cent rate in the October-December quarter, slowed in the January-March period, likely growing somewhere between 1.5 per cent and 2 per cent.
That forecast is based on a view that the harsh winter weather cut into various types of economic activity from shopping at the mall to factory production. Some estimate that the weather cut growth by about 1 percentage point in the first quarter, but will add 1 percentage point to activity in the April-June quarter as the economy is spurred by pent-up demand in such areas as auto sales.
Another factor that affected first quarter growth is a slowdown in the pace of restocking following a huge surge last summer.
Inventory building had contributed 1.6 percentage point to economic growth in the third quarter when the economy had grown at a 4.1 per cent rate. By the fourth quarter, that contribution had dwindled to just 0.03 percentage point. Analysts are not looking for inventories to add much to first quarter growth.
But for the rest of the year there is optimism that growth will rebound to a solid rate of around 3 per cent. That could make 2014 the best growth year for the economy since 2005.
The expectation is that stronger hiring will boost incomes and that will spur consumer spending, which accounts for 70 per cent of all economic activity.
There was good news on the hiring front in the past two months. Employers added 192,000 jobs in March, just below a revised 197,000 increase in February. Those gains suggest that the economy has recovered from the hiring slowdown caused by severe winter storms in December and January.Suggest a correction