06/11/2015 10:23 EDT | Updated 06/11/2016 05:59 EDT

US businesses boost stockpiles 0.4 per cent in April, best gain in 11 months, while sales rise

WASHINGTON - U.S. businesses increased their stockpiles in April by the largest amount in nearly a year while their sales posted a second straight healthy advance.

Inventories held by businesses rose 0.4 per cent in April compared to March when stockpiles had risen a much smaller 0.1 per cent, the Commerce Department reported Thursday. It was the largest increase since a 0.5 per cent rise in May 2014.

Total business sales rose 0.6 per cent in April following a similar 0.6 per cent rise in March. The March performance had been the first sales increase after seven consecutive monthly declines.

The expectation is that further sales increases will bolster boost business confidence and lead companies to boost their stockpiling. The rise in stockpiles will support production gains at factories and overall economic growth.

A separate report Thursday showed that retail sales rose 1.2 per cent in May, a solid performance as demand for autos, clothing and building materials all increased, an encouraging sign that consumer spending, which accounts for 70 per cent of economic activity, is rebounding.

For April, stockpiles rose by 0.8 per cent at the retail level while inventories posted smaller gains of 0.4 per cent at the wholesale level and 0.1 per cent for manufacturers.

A harsh winter, a strong dollar and a plunge in energy prices that squashed investment spending combined to send the economy into reverse in the first three months of the year. The overall economy, as measured by the gross domestic product, contracted at an annual rate of 0.7 per cent in the January-March quarter.

Economists say the economy has emerged from that soft patch and will see stronger activity for the rest of the year. They are forecasting growth of around 2 per cent to 2.5 per cent in the current April-June quarter and expect growth to accelerate to around 3 per cent in the second half of this year.

This rebound is contingent on continued strength in the job market, which should boost consumer incomes and power gains in consumer spending. Last week, the government reported that payrolls increased by a robust 280,000 in May.