BUSINESS

US business expanded stockpiles modestly in November despite lower sales

01/14/2015 10:10 EST | Updated 03/16/2015 05:59 EDT
WASHINGTON - U.S. businesses added to their stockpiles by a modest amount in November, even though sales were weak for a fourth consecutive month.

Businesses increased stockpiles by 0.2 per cent in November, matching the increase in October, the Commerce Department reported Wednesday. Total business sales fell 0.2 per cent in November following a 0.3 per cent drop in October. A separate report Friday says that retail sales declined in December.

While businesses could start cutting back on their stockpiling if sales don't improve, economists remain optimistic. They are expecting a rebound in demand in coming months, given strong employment gains and a big drop in gas prices, which means people have more money to spend on other items.

Further increases in stockpiles to fill empty shelves would likely translate into increased factory production and stronger economic growth.

For November, stockpiles at the wholesale level rose by 0.8 per cent, while manufacturing inventories were up a slight 0.1 per cent. Retail inventories actually fell 0.1 per cent.

A major reason for the bullish outlook on business sales is the improvement in the job market. The economy added nearly 3 million jobs in 2014, the strongest job growth since 1999. The hiring gains mean more people working and rising incomes that should boost consumer spending, which accounts for 70 per cent of economic activity.

Many analysts believe the economy will grow by 3 per cent in 2015, which would be the strongest annual gain in growth in a decade.