BUSINESS

US stockpiles flat in January as total business sales fall by largest amount since 2009

03/12/2015 10:03 EDT | Updated 05/12/2015 05:59 EDT
WASHINGTON - U.S. businesses did not add to their stockpiles for a second straight month in January as total business sales fell by the largest amount in nearly six years.

Business stockpiles were unchanged following a similar flat reading in December, the Commerce Department reported Thursday. Sales in January dropped 2 per cent. That was the sixth straight monthly sales decline and the biggest monthly drop since sales tumbled 2.7 per cent in March 2009 during the depths of the last recession.

While businesses have slowed their stockpiling in the face of falling sales, economists remain optimistic that activity will rebound in coming months. Solid employment growth and falling gas prices should give consumers more money to spend on other items.

The economy added 295,000 jobs in February, marking the 12th consecutive month that job gains have been above 200,000. That is the longest stretch since 1994 to 1995.

Analysts believe the new jobs will bolster consumer spending, which accounts for 70 per cent of economic activity. Stronger demand is expected to spur restocking by businesses at all levels of the supply chain from manufacturing to wholesalers to retailers.

In the fourth quarter, economic growth, as measured by the gross domestic product, slowed to just 2.2 per cent, slower than the government's initial estimate of 2.6 per cent.

Much of the revision in GDP growth occurred because inventory building in the fourth quarter was weaker than initially estimated. But analysts say that could translate into strength in the current quarter as businesses build up their relatively lean inventories.

The January sales decline was led by a 3.1 per cent drop in sales at the wholesale level. Manufacturing and retail sales were also down. Inventories in January dropped 0.4 per cent at the manufacturing level and were flat at the retail level, while wholesalers saw a 0.3 per cent increase in inventories.

A separate report Thursday showed that retail sales fell 0.6 per cent in February as auto purchases dropped the most in more than a year.