U.S. business inventories edged up 0.1% in June following 0.3% May gain; sales fell 1.1%, the sharpest decline since March 2009

Cindy Allen

Cindy Allen

Aug 14, 2012 – Associated Press

WASHINGTON , August 14, 2012 () – U.S. companies barely increased their stockpiles in June from May, and sales plunged by the largest amount in more than three years.

Business inventories edged up a slight 0.1 percent in June after a 0.3 percent gain in May, the Commerce Department reported Tuesday. Sales fell 1.1 percent, the sharpest decline since March 2009 when the economy was still in recession.

The small June increase in inventories pushed total business stockpiles up to $1.58 trillion. That's 20 percent higher than the low reached in September 2009 when businesses were slashing inventories in response to the recession.

Weaker restocking could act as a drag on overall economic growth. When businesses place fewer orders, factory production slows.

The decline in sales reflected decreases in sales by manufacturers, wholesalers and retailers. However, a separate report Tuesday said that retail sales had bounced back in July following three straight monthly declines, a possible sign of a rebound for the overall economy in coming months.

Consumer spending growth slowed to 1.5 percent in the April-June quarter, down from 2.4 percent in the first quarter.

That slowdown translated into overall economic growth of just 1.5 percent in the April-June quarter, below the first quarter's 2 percent growth and much less than the fourth quarter's 4.1 percent.

Economists believe growth may improve later this year, but only slightly. Europe edged closer to recession Tuesday after official figures showed the region's output shrank 0.2 percent in the second quarter of the year, threatening U.S. exports. And the U.S. economy faces a "fiscal cliff" at the end of this year. That's when several large tax cuts expire and a big spending cut is scheduled to kick in.

Economists warn that if the tax increases and spending cuts aren't delayed or reduced, they could push the U.S. economy back into recession.

Wholesale stockpiles account for about 27 percent of total business inventories. Stockpiles held by retailers make up about one-third of the total and manufacturing inventories represent about 40 percent.

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