07/15/2013 10:12 EDT | Updated 09/14/2013 05:12 EDT

US business stockpiles edged up modest 0.1 per cent in May while sales rose strong 1.1 per cent

WASHINGTON - U.S. businesses increased their stockpiles only slightly in May, despite a solid sales increase. The figures suggest economic growth has slowed but could pick up in the second half of the year.

The Commerce Department said Monday that business stockpiles rose just 0.1 per cent in May from April, half the previous month's increase.

Sales increased 1.1 per cent in May after being flat in April. That's the best gain since February.

Slower restocking could weigh on economic growth in the April-June quarter because it means companies ordered fewer factory goods. But the strong sales gain suggests companies may have to order more goods in the coming months to keep up with demand. That could drive more economic growth in the second half of the year.

Many analysts think economic growth has slowed to an annual rate of around 1 per cent or even less in the April-June quarter. That would lower than the subpar 1.8 per cent annual rate from January through March.

Economists expect growth should rebound in the second half of the year to a roughly 2.5 per cent annual rate as the effects of federal tax hikes and government spending cuts fade.

The May increase brought total stockpiles to a seasonally adjusted $1.66 trillion. That's up just 3.8 per cent from May 2012.

Wholesalers cut their stockpiles 0.5 per cent, while manufacturers' inventories were unchanged in May. Retail stockpiles rose 0.6 per cent.

Sales at the wholesale level rose 1.6 per cent to lead all categories. Sales at manufacturers and retailers increased slightly below that level.

A separate report Monday showed that retail sales slowed to a modest 0.4 per cent increase in June.

The brighter second half outlook is bolstered by steady job growth, which has kept consumers spending. Employers have added 202,000 jobs a month through the first six months of this year. That's up from 180,000 in the previous six months.

The increase in hiring has helped overall income grow, offsetting some of the drag from higher taxes.